Abhay Agarwal, Founder and Fund Manager at Piper Serica PMS, expects the Nifty to trade in the range of 17,500-18,500 in the current financial year. "The Nifty P/E multiple is at about 25x for FY23 earnings which make slightly more than fairly valued. The action will now shift to stock-specific outperformance, he says in an interview to Moneycontrol.
After the success of Nykaa, Policy Bazaar and quite a few other recent IPOs, "we do think the IPO activity is going to pick up the pace and we expect the activity levels to slow down only after the mega IPO of LIC next year," says Agarwal who has nearly three decades of experience in the equity stock market.
Q: After more than Rs 36,000 crore of fundraising via IPOs in November, what is your outlook for the IPO market?
IPO market is highly cyclical and most companies that are planning to do an IPO would want to benefit from the current boom in the demand. After the success of Nykaa, Policy Bazaar and other few recent IPOs we do think the IPO activity is going to pick up pace going ahead, and we expect the activity levels to slow down only after the mega IPO of LIC next year.
Penna Cement, Utkarsh Small Finance Bank and Fincare Small Finance Bank are some companies that have received SEBI approval for IPOs. They could be hitting the market anytime. Collectively, these 4 are expected to raise approximately Rs 6,000 crore. Other IPOs that have been in pipeline for quite some time include Star Health, PharmEasy's parent API holdings, Go Airlines, etc. With very high interest from high net worth investors (HNI) and institutional investors, we expect most of these IPOs to go through even at high valuations.
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Q: What should investors expect from the listings of Sapphire Foods, Latent View Analytics and Tarsons Products? And what should they do with the allotted shares on the listing day?
Latent View currently is expected to list at a premium of more than 100 percent going by the strong performance of peer companies like Happiest Minds and robust investor demand.
Also read - Latent View Analytics trades at over 150% premium in grey market ahead of listing
Sapphire Foods continues to report losses which may be expected to continue in the foreseeable future and it is also not a leader in its space. Instead of Sapphire foods, we believe Jubilant Foodworks is a much better investment option to capture the branded food consumption or QSR (quick service restaurant) opportunity. Jubilant has demonstrated performance, has got the scale and is ripe for exponential growth in the future and scores very high on our Porter Model that analyses the competitive strength of a company.
Q: Which two sectors are currently a must have in a portfolio?
Healthcare companies focused on domestic markets will continue to scale up based on robust demand. These include hospitals, diagnostics and pharmacies. Consumer Internet companies will also see big upsides as the market is growing rapidly based on digital adaption and low data costs.
Q: IT story is expected to remain solid going ahead, but is it the time to increase exposure to the segment as the number of positive surprises have reduced?
IT software industry will continue to grow over the next decade. However, investors should focus on companies that are using newer technologies to provide services like web 3.0, blockchain, AI ML, mobile tech, etc. Companies that are still working on pure time and material model will continue to see margin compression.
Q: What are your broad expectations for Q2FY22 GDP that is expected to be announced at the end of this month?
We are expecting a 9-10 percent growth in the Q2FY22 GDP. We expect the FY2022 GDP to grow around 11 percent. This growth is highly achievable since demand has picked up substantially as COVID cases have come down. We are forecasting a higher than consensus increase in GDP of 9-10 percent in FY2023 based on robust GST collections and pick in private capex after a long time.
Q: After hitting record high last month (18,604 on Nifty), the market has been consolidating in a particular range. Do you think the consolidation could continue till the end of 2021?
The Nifty P/E multiple is at about 25x for FY23 earnings which makes it slightly more than fairly valued. Therefore, we do not expect a rush of FPI funds since most FPIs find India to be more expensive than other emerging markets. At the same time, there is a lot of interest by long-term international investors to invest in India with a 10-year view. The flows from domestic investors also continue to be robust. So we expect the Nifty to trade in the range of 17,500-18,500 in the current financial year. The action will now shift to stock-specific outperformance.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.