The broader base is the initial phase and then subsequently it is narrowed down to high earning growth sustainability where multibaggers are created.
The last 3 years of the bear market in small and midcap ended. Unlock and a delay in recovery can only make them stagnant otherwise good companies will be separated from a broad base, Pritam Deuskar, Founder of Wealthyvia.com, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) A week powered by the bulls which pushed Nifty beyond 11,600 levels. What led to the price action in the week gone by?
A) The Street was awaiting to hear from the US Federal Reserve and RBI about their stance on COVID-19 relief measures and they came out with continuance and 'no rush to withdraw' approach.
This helped Bank Nifty surge 4 percent plus in the week gone by which had been laggard compared to the Nifty rise in the last 3 months.
Also, as we at Wealthyvia look at monthly charts being investments oriented. The direction of Nifty has stayed strong with other sectors like metal, auto, and telecom coming back slightly.
Q) September series rollover data suggest that bulls will likely remain in control. Which are the important levels that one should track in September, and Nifty50 touch 12000 levels in this expiry?
A) The Nifty option chain analysis helps to gauge the range in the short term where the highest OI put and call tells you the range which is between 11500 to 12000 levels. The Nifty 11780 is a crucial breach to reach 12000.
Q) In terms of sectors, financials were in focus with banks taking the lead in terms of sectoral gainers, followed by realty and auto. What led to the price action, and in the coming week do you think Metals would be in limelight?
A) If COVID related relief measures are going to continue as indicated by central banks, basically interest rates cannot grow.
The decision on Moratorium extension post-August can have effects further and lead to separate low moratorium low NPA/distress banks and NBFC to rise and high ones will be left behind.
There have been upgrades in SBI and few banks by many agencies which also contributed to the growth. On the real estate front, as Maharashtra government stamp duty reduction to 2 percent from 5 percent has come up with the help of a government-appointed committee led by Deepak Parekh. It was also welcomed and encouraged by the housing secretary at the national level.
With lower interest rates and duty reduction, real estate high ticket size investors which have not been buying since the last 5-6 years, may start thinking some pick up in residentials from Jan-Feb if they find better bargains in the situation.On metals, we do not recommend commodity - metal companies as a matter of discipline but after the brutal fall from 2018, they have come up for the first time in some positive territory.
Q) Mid & smallcap index has wiped out losses for the year 2020 compared to Sensex, or Nifty which still trade in the red. What is leading to optimism, and what are the factors which could steal the thunder for broader markets?
A) Before starting a longer better bull trend, the market always shakes everyone and thereafter whenever rally comes earning yield, valuations along with some growth visibility mid and small outperform large caps in that particular year by a good amount.
The broader base is the initial phase and then subsequently it is narrowed down to high earning growth sustainability where multibaggers are created.
The last 3 years of the bear market in small and midcap ended. Unlock and recovery delay than expected can only make them stagnant otherwise good companies will be separated from a broad base. The market has already started doing that.
Q) What is your call on the rupee which touched 5-month high? How will it impact sectors and FII flows?
A) The federal budget deficit with growing debt by balance sheet expansion to support governance, we expect decline may continue but will not be a sharp one. It also reduced lower-risk assets.
However, predictions of supplanting the dollar or its demise are totally weird exaggerations. As per IMF, the dollar share of total global reserves fell from 64.7 percent in the first quarter of 2017 to around 62 percent in the first quarter of 2020. In the last many year's figures have been 59-60 percent too.
Differences in India and US interest rates on forwards are usually indicators of USD-INR relations. Since 2010, we saw the largest FII inflow in India this August with a whopping USD 5.4 billion-plus net purchase.
There will be specific sectors like chemicals, agrochem, pharma, niche IT where it may get more attention. Flows will continue as India is one of the best growth options for a bounce back after unlocking and return to normalcy in the coming years.
Q) Please share 3-5 trading ideas for the coming week with a time horizon of 3-4 weeks.
A) We have longer investment horizon ideas and bullish on pharma, agrochemicals, platforms, securities companies.
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