As a trader that predicting the market is not our main objective, we need to align with market direction and trade accordingly, said Siddarth Bhamre, Head of Research, Religare Broking in an interview with MintGenie. If global issues are taken care we may see market focus shifting back to earning in later part of FY23, he added. Bhamre advises investors to stick to growth stocks for foreseeable future.
Edited excerpts:
How would you look at the recent correction and the minor recovery that we are seeing?
As inflation flared the world over, there were strong expectations about the Fed hiking interest rates and that led to selling in markets globally. As FED hiked rates by 75 bps markets recovered from lower levels. So this is typical buy on rumors sell on news syndrome but of course, it's the opposite for the negative news i.e. sell on rumor and buy on news. This recovery has been more on short-covering and market bouncing from the oversold zone.
Even though the markets witness bouts of recovery amid the volatility, the trading volumes have been consistently down. What does that tell you about the market sentiment?
FIIs have been on a selling spree. DIIs continue to buy as SIP flows are still trickling in. So institutions are doing what they are supposed to do. Volumes mainly have declined from direct retail and HNI clients as they are majorly on the bullish side of the trade. With markets correcting since Oct 2021, the impact on this segment is highest and interest has dwindled down for time being. For them to return, we need more than a short-covering bounce back.
Do you believe this volatility will lead to a value trap for investors?
In bull market participants look for high-growth stocks while in a bear market value is preferred. In a market like this, wealth has been created predominantly by investing in growth stocks and we believe one should stick to it for the foreseeable future as we remain a high-growth market. Value investing vs high growth investment philosophy is a problem for fund managers in matured and low-growth markets. We are still growing at a good pace.
Do you think this is the best time to look at value stocks or prefer growth stocks with high RoE?
We prefer high-growth stocks which have become attractive from a valuation perspective due to corrections in the market.
What are the short-term trends one must look out for?
We just got done with the F&O expiry. Data suggests we may not see a major fall this month as of now. However, to build a positive scenario, there should be a fresh formation of long positions which are still missing in the index. Technically too, indices should breach this lower top lower bottom formation which they are into. So a pause in fall or some bounce back is anticipated but beyond that things are still not bullish.
Which sectors do you see the risk-reward favouring currently?
The auto sector tops this list for us. We would also like to add names from the cement and IT space as well. Selective consumer durables and financial names too will make the list.
Would you advise investors to patiently wait in the current environment or continue accumulating?
There is no blanket answer to this. Different market scenarios offer different kinds of opportunities. Case in point, though markets are correcting, the Auto sector had offered wonderful investment opportunities. So for investors, though they don’t have to see screen throughout the day, their eyes and mind should be open to opportunities throughout the year. Even in the current market situation, there are stock-specific opportunities.
If you advise them to patiently wait, till when or how long?
Investors who have already invested and are seeing their portfolio in red need to understand that investing is rewarding but there will be a year like 2011, or 2022 where their patience will be tested. If you are in the right names and growth visibility is there then patience is the name of the game. If global issues are taken care we may see the market focus shifting back to earning in the later part of FY23. So a couple of quarters is what participants may have to give to see their portfolios showing some green color.
Do you see the end of this correction in sight? If yes, what could turn it around for Indian indices?
The sooner we realize, the better it will be as a trader that predicting the market is not our main objective. We need to align with market direction and trade accordingly. Also as an investor, we need to understand valuation metrics for the sector and company and start investing when the valuation parameter is near to or below multi-year averages provided growth visibility is not pushed too far due to unfavorable scenarios et al. We believe macro factors like inflation and geopolitical issues which actually are interconnected, getting them addressed are most important factors for market turning around.
Do you have a Nifty target in mind for December? Most analysts are divided from 12,00-14,00 to even 16,000, where do you see Nifty by year-end?
As a trader and investor level of the index is of no significance. Index levels are basically to major the journey of markets at large. We won’t get into the guessing game.
