Markets have been extremely volatile over the past few weeks and it does definitely appear so, that it’s not for the faint-hearted at the moment.
Markets have been extremely volatile over the past few weeks and it does definitely appear so that it’s not for the faint-hearted at the moment, Aamar Deo Singh, Head Advisory, Angel Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
Q) With most global rating agencies reducing the growth forecast for India, do you see a second stimulus package coming?
A) Markets are definitely grappling with the current hostile environment, as fear looms large upon the future of global growth.
However, markets are still hoping against hope that the trillions of dollars being pumped into the global economy will somehow, lead to a soft landing, rather than a crash landing of the economy.
And, given the global forecasts by leading global agencies, it does definitely create a serious picture of concern. Given such conditions, it is but natural for the markets to look upto the government to do the best that it can, in order to prevent everything coming to a standstill.
Q) 2-3 stocks that are looking attractive for a medium to a long term time frame?
A) Amongst the few stocks that can be looked at investing from a long-term perspective, IPCA Laboratories can be looked at, with a potential upside of 25%-30% from current levels. It is expected to outperform the Indian Pharmaceutical market (IPM) by 8-10 percent p.a. in FY 22.
Another stock, that can be looked at from a long-term perspective, is Asian Paints Ltd (APL), with an upside potential of almost 20 percent from the current levels.
We expect APL to report a healthy bottom-line CAGR of 19 percent over FY2019-22E due to leadership position, strong brand, wide distribution network and improvement in operating margins.Q) The Nifty50 has rallied by over 20% from lows. Do you think the momentum is likely to sustain?
A) Markets have been extremely volatile over the past few weeks and it does definitely appear so, that it’s not for the faint-hearted at the moment.
The sort of volatility that has been in the display, clearly shows that fear still rules the roost, and investor sentiments are cautious.
Just as every cloud has a silver lining, similarly, the sharp correction of almost 40 percent in the benchmark indices from their all-time highs, and the simultaneous crack in prices of quality blue-chip stocks, emboldened the smart money to go shopping as valuations turned attractive.
This resulted in a sharp rally of almost 20%+ gains in the past couple of weeks, apart from short-covering also playing its part. This pullback rally has been too fast and furious at the same time, making the bears run for cover.
However, the momentum is likely to ebb as we could witness profit booking at higher levels, so one definitely needs to be cautious in one’s approach in the markets.Q) What are the important levels which investors should track this week?
A) Talking about the benchmark indices, Nifty is likely to run into resistance between 9350-9650 zone whereas on the downside, 8800-8400 zone to act as a crucial support zone.
Looking at the SENSEX, support is seen around 30,000/28500 zone whereas resistance is seen around 32,000/32900 zone.
Q) What is your call on NiftyBank especially after the recent measures were announced that could benefit the banking space/Nifty Financial services?
A) NiftyBank has relatively displayed weaker performance as compared to Nifty, with Nifty currently at (-24%) YoY loss as compared to (-35.70%) YoY loss for NiftyBank.
The current crisis definitely does not bode well for the banking sector, and it would impact the Private, Public as well as the NBFC space, all in all. That’s the reason we are witnessing a tepid bounce back in this sector.
The coming quarter is going to be of great significance for this sector, as the real impact will be known by then. So, once is surely advised to approach this sector with caution.
Q) Small & midcaps outperform in the week gone by – what is leading to the outperformance? Is it the beaten-down nature or the possibility of stimulus measures that could support the broader markets?
A) The recent rally that we have witnessed since March last week, wherein the Small Cap Indices, both on NSE & BSE, witnessed gains of around 5 percent on a WoW basis, against the 1.70 percent gain by major indices.
This clearly shows that the small and midcaps are trying to gain the lost ground, but whether it will be sustainable or not, we will have to wait for some time, before a clearer picture emerges.
Also, we should not forget, that many of the small & midcap stocks are still down by over 50 percent from their highs. Till the time, we don’t see a general revival in the economy, this space is likely to remain under pressure. Now, quality will become an even greater focus amongst investors.
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