moneycontrol, Jun 16, 2020
Going forward, equity markets would be a function of economic recovery and sustained liquidity support provided by central banks to support financial markets.
Every fall is not the same, but similar. It is a good time to pick up businesses having longevity, and ride through this volatility. But, investors cannot expect to reap benefits immediately as markets don’t like uncertainty, Hemang Kapasi, Portfolio Manager – Equity Investment Products, Sanctum Wealth Management, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Indian market snaped two-weeks of positive close and turned negative. What led to the fall on D-Street especially when it started off on a bullish note?
A) If one does an analysis of equity market performance for the last one month, all the major world equity market indices are in positive territory from ~5-15 percent.
Investors worldwide turned euphoric about the resumption of economic activities as lockdowns are being lifted across the world supported by stimulus packages by the governments and liquidity pumped in by the central banks.
Even Indian equity markets participated in this rally with gains of about ~11 percent in the last one month. Post a sharp up move in the equity markets world over, and just before the FOMC meeting, investors were seen booking profits ahead of an important event, and Indian equity markets were no exception.
Q) What is the way ahead for markets? Do you think we could retest 7,500? If not, which are the crucial levels that one can watch out for on the downside and on the upside?
A) Going forward, equity markets would be a function of economic recovery and sustained liquidity support provided by central banks to support financial markets.
As India is still coming out of lockdown and if one goes by forecasted negative GDP growth for the year, then we are likely to be trading on the higher range on indices.
Q) Do you think we are staring at another nationwide lockdown as cases with respect to COVID-19 go up? If yes, what could be the impact?
A) Lockdown would not be a solution as the pandemic is here to stay for some time till the vaccine is found. Lockdown can be used to create health infrastructure, but it can’t contain cases as seen in this lockdown.
Lockdown impacts the whole economy and impacts each and every one. Governments, Corporates, and individuals will have to work around this taking precautions and move ahead as economic implications are far more severe if lockdown is implemented
Q) OECD sees 7% contraction in India’s growth – if second waves hit India. Do you think there could be another stimulus announcements from the government?
A) As a lender of last resort, the Government has to take measures to support the economy. To predict the manner in which it can be implemented is a futile exercise, governments have to step up to revive demand when the need arises.
Q) Small and midcaps outperform slightly in the week gone by — some stability there as major selling was seen in the top overbought stocks?
A) With equity markets having a big up move in the last one month, there is some positivity seen in mid & small-cap space. Having said that they are still down 22 percent from their 1 year high and 32 percent down from their all-time high in December 2017
Q) What is your call on financials? How should investors trade NiftyBank in the coming week?
A) Financials are a place of uncertainty for the next 6 months. In the coming days they might be struggling on both topline and bottom-line.
Credit growth pick-up might take a bit of time to pick up as banks have become risk-averse to lending in these uncertain environments and on the other hand they will have to deal with rising NPA’s related provisions.
That’s the reason the financial sector is among the worst-performing sector in the last 3 months, having said that any improvement in the above two-aspect will lead to huge re-rating for this sector.
Q) The most abused phrase is ‘It’s different this time’. But, this time it is actually different, and history might just rhyme and not repeat. This time the only thing which is certain is uncertainty. What are your view?
A) Its true, history may not repeat but it does rhyme. Every fall is not the same but similar. It is a good time to pick up businesses having longevity and ride through this volatility. But, investors cannot expect to reap benefits immediately as markets don’t like uncertainty.
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