Markets are unlikely to retest the June lows, says Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. In an interview with MintGenie, Vijaykumar said chasing low-grade cheap stocks and expecting them to deliver superior returns is a recipe for disaster. New entrants should invest in high-quality stocks and wait patiently, he advised. Edited excerpts
After strong gains, the markets have started to fall again, where do you think the market fall arresting itself?
Markets have turned choppy on heightened uncertainty regarding the Fed's response to inflation in the US. If the Fed sounds ultra hawkish at the Jackson Hole symposium markets may correct further. But markets are unlikely to retest the June lows.
What do you think are the key reasons behind the latest bout of correction?
The market bounced back 18 percent from the June lows. Such a ferocious pullback in a short time warrants profit booking and some correction. Global market uncertainty and the sharp slowdown in China are additional concerns.
Do you believe this is a 'buy on dips' market or 'wait and watch?
This is currently a 'buy on dips' market. But the market mood and texture can suddenly change.
A mantra you would like to give to first-time investors entering this market?
A one-sentence message would be " Invest, don't trade." New market entrants always chase low-grade cheap stocks expecting them to deliver superior returns. Experience has taught us that this is a recipe for disaster. New entrants should invest in high-quality stocks and wait patiently. A good option would be to invest through SIPs in mutual funds.
What, according to you, should be the strategy for long and short-term investors?
Long-term investors can buy the dips, particularly in high-quality financials, autos, capital goods and telecom. Short-term investors have to be very cautious since there is high uncertainty in global markets. The short-term is totally unpredictable.
Will the IPO market will remain busy or quiet for the rest of 2022 and why?
The disastrous IPOs of new-age digital companies like Paytm and Zomato have impacted the IPO market, which is likely to remain subdued for some more time. However, good IPOs which are reasonably priced will have good demand.
Now that FPIs are buying, DIIs have begun selling. Do you think this is just profit booking or there is a deeper reason behind this?
In the tug of war between FPIs and DIIs, the latter has clearly won. The relentless selling by FIIs from October 2021 through June 2022 has been absorbed by DIIs. So, it is rational on the part of DIIs to book some profits. Also, there is no valuation comfort in the market now. So, DII selling is justified. If the market corrects further, they will turn buyers since they have ample cash to invest.
5 stocks that are on your buy list currently
Can't be stock specific. We are bullish on leading names in private sector banking, commercial and passenger vehicles, telecom and capital goods.
Now that the earnings are done, what trends will the markets look at?
The market will be keenly watching for Fed chief Jerome Powel's comments at the Jackson Hole symposium. This will have a short-term impact on the mother market US and consequently on other markets too. The fallout of the sharp slowdown in China will be another area of focus for the markets.