Mkt volatility to rise; enter with 2-3 yr frame: BlackRidge

BlackRidge Capital Advisors expects the volatility in the market to increase due to domestic and global factors. Arindam Ghosh, its MD and CEO says that policy uncertainty has been spooking the markets. Pressure on the currency will also continue in the long-term, he says.

He advises investors to enter the market with a 2-3 year horizon. Going forward, flows into the emerging markets (EMs) will be clearly on the basis of risk-on and risk given by news flows, he says. In such times, it is better to invest in quality stocks than quantity, he told CNBC-TV18. Information Technology, pharmaceuticals, and energy stocks are his favourites now. In the banking sector, he recommends staying away from PSUs. Yes Bank is his preferred pick in the pack.
 
Also read: SBI well capitalised; rating cut won't impact biz: MD Below is the edited transcript of his interview to CNBC-TV18. Q: How are you approaching the market now? Clearly, you will look only for lower levels to buy? A: It is very tricky and complex situation with a whole confluence of both global and domestic factors. Globally, if you look at obviously the policy uncertainties have been spooking markets. We saw the big policy twist, the big Fed’s U-turn, which set fire to the market. So as the market dynamics become more and more complex, volatility will increase. Q: What is your advise to investors as it looks pretty tempting? We have seen 30 percent rise in dollar terms in the last 20 days for this market. Do you advise investors to get in now or are you cautious? A: If you have to invest with a two year kind of horizon, then there is a lot of deep value in the market. One can come in and look at quality stocks and build positions and build a good portfolio. If you are looking at short-term trades then given the situation that we are in and the downside risk to growth, political uncertainties; we are also in an environment where if you look at the developed markets (DM) versus emerging markets (EM) trade then over the next three-five years, we will see the full effect of the recovery in the G3 nations. It means that inflows into emerging markets will be purely on the basis of risk-on, risk-off trades given by newsflows. We also need to bear in mind that earlier when in the run up to the Fed tapering, there was a lot of discussions whether markets have priced in the taper whereas the developed markets probably priced. We saw the effect of that coming in equity and bond markets, but I am not too sure whether emerging markets had or can price in tapering clearly it is uncharted territory. There are a lot of moving parts and we therefore need to take a view whether it is long-term or whether it is short-term and based on that get into stock picking. Obviously, in a situation like this the preference would be on quality over quantity at this point in time. Q: Going by the tone of the Fed, do you think tapering is off for a bit and this tactical pullback we saw in risk assets emerging market equities, emerging market currencies could go for a bit longer than most experts factor in? A: Our belief is that the global liquidity cycle is going to turn sooner than later. Of course we were surprised with the Fed’s decision not to taper, but our belief is that it could well be very short-lived. It could well be October unless we have the US debt ceiling issue kind of blowing up in which case probably it will get postponed to December, but definitely it is a very short window of opportunity that we have from an India point of view to fix a whole lot of things.