One should definitely not liquidate at the current levels and should accumulate quality stocks at all levels, says Sumit Bilgaiyan of Equity 99.
The frontliners will continue to outperform at least during FY21 but by H1 FY22, one may expect a trend reversal. One should definitely not liquidate at the current levels and should accumulate quality stocks, Sumit Bilgaiyan, Founder of Equity 99, tells Moneycontrol's Sunil Shankar Matkar in an interview.
Edited excerpts:
Q: Given the rally after a steep fall in March, do you expect the market to see a V-shaped recovery or the bottom is yet to be formed?
No, we do not expect a V-shaped recovery, as the market will factor in the weakness seen in the economy. Markets may witness a sharp bounce once there is any visibility or clarity of businesses being able to return to normal but any sharp bounce will be followed by corrections during the Q1FY21 result season.
Q: Considering the supressed valuations across sectors, which are the five stocks that can be multibaggers in the coming quarters?
There would be a plethora of stocks trading at dirt cheap valuations. Rather than betting on multibaggers one should pick quality names which can provide substantial returns from each sector. We recommend HUL, Trent/ABFRL, TCS, HDFC Bank, Bajaj Finance, etc to name a few, as we expect the pent- up demand to unleash in FY22 and these players will the major beneficiaries.
Q: Broader markets (midcap and smallcaps) were expected to outperform benchmark indices this calendar year. Do you think they can outperform frontliners before 2022?
Yes, we believe the frontliners will continue to outperform at least during FY21 but by H1 FY22 one may expect a trend reversal.
Q: Will the coronavirus outbreak delay economic and earnings recovery by a year at least?
Yes, as there will be a multifaceted impact. Our government will not be able to provide the required amount of stimulus to bring the economy quickly back in place, as it will be stuck between a rock and a hard place.
To revive the economy the interest rates will have to be kept lower (irrespective of level of stimulus) and if government decides to provide more stimulus, it will have to borrow more and if the government borrows more, the fiscal deficit will widen and they will have to increase the interest rate, which will basically derail the recovery process. Hence, we will have to let economy endure the pain for some time, which will lead to delayed recovery.
Q: Do you think the expected NPA (non-performing assets) crisis due to the lockdown will impact banking and financials leadership position in the NIfty50?
Yes, as we expect businesses to continue to remain weak, thereby reducing the safer prospects for bankers to do additional lending, delinquencies and NPAs will rise on the liability side, while assets side will increase as people crowd to the safe haven of fixed deposits amid weaker equity markets, leading to asset liability mismatch and thereby squeezing the NIIs and NIMs for the banks and increased slippages for near term.
Q: What is your advice to your clients? What should they do with their portfolio?
One should definitely not liquidate at the current levels. One should accumulate quality stocks at all levels, thereby averaging. While on the other hand, on all the bounce one must evaluate the holdings, in case they feel they hold stocks which are expected to be hit severely during FY21, they may choose to book the loss else for the stocks they are sceptical in terms of impact and if they can hold them for at least next one and a half years, one must continue to hold as we expect FY22 to be a strong growth year across the board.
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