What do you think of the market recovery? Is it a dead cat bounce? How are you seeing it?
I think the most important thing to note in this market is that the volatility has started to cool off. Last week, the market was very stable. I think we just hit a short-term bottom. My view is that going forward, the market may not see a big swing. There could be a huge upside in the markets.
In the short term, it looks like financials will take the lead this time around and valuation comfort is much higher there. I think Nifty could have bottomed out in the short term. Second, most central bankers have been making decisions to control inflation. The Indian government has also taken some steps in the past week. So inflation should be on the curb in the next month or maybe a couple of months.
US bond yields have cooled off, 10yr bond yields from highs 3 plus or minus 2.7 and all. That’s also one of the things we’re looking at. Global markets have been seeing some form of support at lower levels. These three things are giving a clear indication that in the short and short term the markets have bottomed.
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There’s a little bit of turnover going on in the sector, a little bit of recovery in the banking sector. We are talking about car collection too. How do you see these two sectors? Is there an advantage given the comfort of the titration?
Two things. One, obviously, after commodity prices cool off from near-term highs, the biggest beneficiary will be automakers. In the last 10-15 days, auto stocks have gone up quite nicely. Bank stocks from near-term highs have, on average, corrected 15-20%, and in some cases have been much higher. Fourth quarter numbers were pretty strong for most banks and we like that. In that perspective, the comfort of valuation is there and in the future, the comfort of management will also be there in the future. My opinion is that finances should work well in the short term. Second, in the last two or three months, we’ve seen tech stocks get hit. Six months ago, the FIIs hit financial stocks between last October and November, when they started the selloff. The first round of sale was made with financial securities that they owned.
We’ve been seeing it in the tech space. Until the first quarter numbers are reported, we will have some sort of sell-off in tech stocks.
What’s your take on the broader markets because the real pain was seen on that front? Do you expect large-cap companies to continue to outperform the broader markets?
Whenever there is volatility in the markets, there is a lot of uncertainty and noise on the street. We see that people tend to focus on large-cap stocks rather than mid-cap stocks.
My feeling is that this year would be more specific to stocks rather than mid-cap stocks. I would prefer large-cap stocks this year. The talk of inflation and margin pressures we’ve seen from many companies in the fourth quarter indicates that large caps should be better off playing this year for the next two quarters until things settle down. Temporarily, I think we’ve bottomed out at 15,800 or so.
(Disclaimer: The recommendations, suggestions, points of view and opinions given by the experts are their own. These do not represent the views of the Economic Times)