The intensity of resurgent wave of COVID is much higher than last year. However, we do not expect repeat of March 2020 crash in the equity markets, said Gaurav Dua, SVP, Head - Capital Market Strategy, Sharekhan by BNP Paribas in an interaction with Moneycontrol's Swati Verma.
Insurance sector has a structural growth prospects and should be essential part of a long-term investment portfolio. We are positive on ICICI Prudential Life and Max Financial Services within the insurance space, Dua added.
Edited excerpts
COVID has raised its ugly head once again and the second wave seems more brutal than the first one. How should one approach markets now? Has the resurgence compelled you to revise earnings estimates for FY22?
The intensity of resurgent wave of COVID is much higher than last year. However, we do not expect repeat of 2020 in the equity markets. Economic impact is limited due to localised lockdown and no blockage in global trade this year. Vaccination drive also provides light at the end of tunnel. Some of the leading countries like US and parts of European region has already emerged out of recent wave and given vaccine to large part of population.
Having said this, the consensus earnings growth estimates for FY22 are certainly at risk now. But the markets have also corrected accordingly and shaved off most of the post Union Budget rally earlier this year. We see a strong support at 13,600-13,700 on Nifty - the low it made in January 2021 and consequently see opportunity to accumulate in the prevailing volatile conditions.
Tell us about your views on financial space (banking and NBFCs) amid the second wave of virus. Names you are bullish and bearish on.
We continue to prefer leading private banks as compared to public sector banks except State Bank of India. We see headwinds for NBFC space in the near term and investors need to be selective here.
Automobile manufacturers showed some recovery in the past few months; however, the second wave can be spoilsport. What's your reading on the development?
Resurgence of COVID has clouded the near-term demand for auto sector. So, it would be better to stay selective and focus on export-oriented auto ancillary companies in the immediate future.
Nifty Metal index has risen 13% in the past month. Is it the right time to buy those stocks?
Metals, especially steel, is set out on a multi-year rally globally. Though it does not make sense to chase the metals stocks after the steep run up lately, we continue to be positive on metal stocks with investment horizon of 18-24 months.
Are insurance stocks a must-have in one's portfolio at this stage?
Insurance sector has a structural growth prospects and should be essential part of a long-term investment portfolio. We are positive on ICICI Prudential Life and Max Financial Services within the insurance space.
Apart from COVID, what are the key factors that may impact the market in FY22? Tell us about some key emerging investment themes and the ones you are positive on.
Quarterly results and the management commentary on growth outlook along with progress on vaccination are key domestic factors for immediate term.
In terms of investment themes, we expect export-oriented companies in sectors such as IT services, pharma, specialty chemicals, among others to perform better due to healthy growth outlook in US and other major regions globally.