Indian share market benchmarks BSE Sensex and NSE Nifty 50 have tumbled over 15% per cent from record high levels on the back of Russia-Ukraine war, and other global developments. Sandip Sabharwal, investment advisor, in an interview with Surbhi Jain of FinancialExpress.com, advises investors to exit stocks bought on tips and unsustainable expectations, and evaluate fresh opportunities to buy. Sabharwal also said that the recent sell-off can be used as an opportunity to buy new stocks, but in a staggered manner. Amid chip shortage and rising raw material cost, Sabharwal said that auto stocks can be bought on deep corrections. This sector has been a big underperformer over the last many quarters. Here are the edited excerpts:
1. What should investors do with their portfolios amid the current market scenario?
Investors need to take a hard look at their portfolios to evaluate the reasons why they bought the stocks in the portfolio. If the fundamentals are intact and the thesis of investment remains strong then there is no harm in holding on. However if stocks were bought on some tips, unsustainable expectations, etc then it is best to exit and get into stocks where conviction is higher. Overall the time to exit big time is behind us; now we need to evaluate opportunities to buy.
2. Is this a bull market correction?
At this stage it looks like that. However inflationary pressures are building up very strongly and that could impact economic revival as well as corporate profit growth going forward and needs to be keenly watched. Growth expectations are still very high and negative surprises are something that the markets are not ready for.
3. What are the key levels to watch out for below which Nifty, Bank Nifty could witness freefall?
This is more of a technical question. Fundamentally we are more convinced to buy when we get our prices and valuations and such corrections are normally good for value investors. That said markets technically are still not as oversold as to indicate an immediate bottom.
4. How much of the rally is left in the commodity market?
Commodity rally is unlikely to sustain for very long and the corrections will also be as sharp as the up move. There is a supply disruption currently and then there is the question of demand. Higher prices combined with monetary tightening will lead to some demand destruction also. Overall I would think that investors should be careful in commodity stocks at this stage as that is the only segment of the market which has moved up and other segments have corrected sharply.
5. Can the recent sell-off be used as an opportunity to buy new stocks?
Yes it should be in a staggered manner. I believe over the next 2 weeks we should see a panic bottom being formed.
6. What are your overweight and underweight stocks and sectors?
Overweight once correction is over would be Infra and Capital Goods, Select Automobile companies, reopening trades as well as financials. Underweights will be consumer and pharma stocks. Technology would be neutral.
7. Where do you see broader market indices going from here?
We could still see a 5-15% correction before the indices bottom out
8. How do you see Auto space amid chip shortage and rising raw material cost?
Auto has been a big underperformer over the last many quarters. However now we seem to see value coming back. Sentiments are also impacted due to rising fuel prices and that is something we need to watch out for. Overall it’s a sector to look out to buy on deep corrections.
9. What are the key triggers and drivers for Indian stock markets going ahead?
Key triggers are the inflationary trajectory as well as the pace of monetary tightening longer term. The Russia Ukraine crisis could have longer term implications which will depend on how things pan out once the war gets over. If inflation remains relatively benign in India then we could see India actually outperform longer term.
