Election results are not the biggest driver of the market and often there is a one-day reaction only. They may, however, give us clues toward any major shift in voting patterns said,Rohit Srivastava, fund manager – PMS Sharekhan by BNP Paribas
Oil prices are likely to rise again in the coming months but maybe more slowly, which will put pressure on the currency front again at some point in future, Rohit Srivastava, fund manager – PMS, Sharekhan which is subsidiary of BNP Paribas said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q. Despite an appreciation in the rupee and an over 30 percent drop in the crude oil prices the market has been rangebound. Where do you see the market heading over the next one year?
A. While one year is a long time period there is more downside risk than upside. Oil in the medium term is an economic commodity and its price movements are closely linked to the market.
In the near term, we think oil is oversold and a bottom in oil may coincide with a low in Nifty and both could recover from here.
Q. Is it the right time now to invest or would it be wiser to wait until December 11, when state elections results will be announced?
A. Election results are not the biggest driver of the market and often there is a one-day reaction only. They may, however, give us clues toward any major shift in voting patterns.
Q. Which sectors would you allocate your money in current market condition?
A. In what is likely to be a very difficult investing environment, I think metals and mining might be an outlier. It has been beaten down by the strong dollar but that may be coming to an end.
At 97-98, the dollar index appears closer to a top than a bottom and once that trend clearly changes we will be back to seeing higher prices for commodities and better prices for the underlying metals and mining stocks. So, that is where I will focus on accumulating stocks.
Q. How do you look at the financial space after the quarterly earnings?
A. Many of the trends seen in the previous quarter have continued, clearly, it highlights the idea that the approach has to remain stock specific as earnings growth is not based broadly.
Q. Do you believe the rupee recovery and fall in crude oil prices are short-lived?
A. The pressure on the Indian rupee from a globally rising dollar index is likely to cool off but there may be other headwinds that can develop down the line.
A general weakness in global equities amid rising interest rates is one of them. This can cause foreign investors to put pressure on currency flows. On the other hand, I think the fall in crude oil is temporary and driven by near-term factors.
The fall was sharp as speculators were record long in the futures markets. The recent news forced an unwind that is now showing up as a backwardation in oil futures that often signals a bottom and an oversold condition.
Oil prices are likely to rise again in the coming months but maybe more slowly, so we might not push panic buttons on oil but it will slowly put pressure on the currency front again at some point in future.
Q. How do you expect the consumption story to play out in light of the slowdown in lending to NBFC following the IL&FS debt crisis?
A. This is a complex question as there are too many moving parts. The positive fallout of this is that valuations at least have come down. That said we are watching closely to gauge if the worst is behind us.
While the active role of the government on the issue is a strong positive, what is really needed is a change in sentiment and a return of confidence in money markets.
Q. Do you think the rally in technology stocks is done with the rupee recovering or you would still want to have IT stocks in your portfolio?
A. I think IT stocks do not move only because of currency movements and if that were to be the case then bets are off. That said weakness in global tech stocks as reflected by the Nasdaq is an important factor for sentiment toward the sector.Right now, a slowdown in tech earnings in the US is working negatively on sentiment. So, in general, I am avoiding tech stocks in medium term though in short term, there may be some trading opportunities on the upside.