Investors have already factored in slower GDP growth amid coronavirus pandemic: Ritesh Asher

Investors have already factored in slower Gross Domestic Product (GDP) growth due to the novel coronavirus pandemic and its impact on the economy, and it seems that the market has already discounted this news when hit a 52-week low, Ritesh Asher - Chief Strategic Officer (CSO) at KIFS Trade Capital, said in an interview with Moneycontrol’s Kshitij Anand.

Here are edited excerpts from the interview:

Q. It looks like the markets seem to have witnessed profit-taking at higher levels. What led to the sharp sell-off on D-Street and then some recovery towards the close of the week?

A. The market witnessed a bounce back from the bottom of 7,500 largely on the back of relief measures introduced by the government.

Muted earnings season also weighed on sentiments of traders recently which lead to a sharp selloff. But speculations over various stimulus packages for stressed industries from the government has contributed to this end of the week recovery.

Q. Any factors which investors should watch out for in the coming week?

A. For the coming week, investors should look out for Q4 FY2020 earnings and growth rate of coronavirus cases in India and across the world, as it plays a crucial role in directing further economic actions.

Also read: 10 key factors that will keep traders busy this week

Q. Another mega-deal in RIL’s Jio Platforms. What are your views and estimates on the stock and what should investor’s do – buy, sell or hold?

A. Reliance Industries’ Jio had a back-to-back deal in the span of less than a month from Facebook followed by Silver Lake Partners and this is the third deal in a row for by US-based company Vista Equity Partners making it the fourth largest company in India, in terms of valuation.

These deals will help RIL reduced its debt which was acting as a black spot for the reputation of the company. Reliance Industries has great potential and we recommend investors follow a buy on dips strategy and hold it if you already have it in your portfolio.

Q. Small & Midcaps outperformed in the week gone by. Looks like investors are slowly accumulating beaten down names?

A. Fundamentally, many stocks were available at favourable valuations and investors seem to have taken advantage of this opportunity. It has been observed that after front liners, the pullback was seen in the small and midcap space.

Q. Moody's says India's negative rating outlook reflects a rising risk of slower GDP growth. Do you think this is already factored in or will it weigh on markets and investor decision making?

A. Investors have already factored in slower GDP growth with the ongoing COVID-19 pandemic and its effect on the economy. It seems that the market had already discounted this news previously when the market made a 52-week low.

Now, market sentiments or investors' decision will depend on the future aspect of this ongoing situation based on how government and industries will take measures to overcome this negative impact.

Q. Do you think the lockdown could get extended beyond May 17? If yes, what is the kind of impact it could have on markets?

A. No, we do not think that the lockdown may get extended further for the whole country, but there might be a few states which could extend the lockdown depending on the spread.

We also do not expect things to go back to normal as it was before. The government may lift the lockdown slowly and gradually, which will act as a relief for industries that are out of business since March.

This will slowly start generating income and cash flow for drying out the economy resulting in positive impact on the market.

Q. Specialty chemicals, pharma best-placed sectors do ride out of COVID-19 storm. But, after a swift rally, are these still a good buy at current levels? What should investors do?

A. If we talk on the investment perspective, pharma is good to bet from 2017 till early 2020. The pharma sector has corrected about 45 percent, the recent recovery was around 15 percent lead by good accumulation on institutional front.

There is still a lot of space left for the sector so investors are advised to buy on dips and accumulate fundamentally sound pharma stocks for better returns.

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