Alok Singh of BOI AXA MF suggested that at the current point investors should continue to invest in a staggered manner with an objective of long term wealth creation
The current calendar year will have its share of induced liquidity which will be largely due to global macroeconomic situation, said Alok Singh, Chief Investment Officer, BOI AXA Mutual Fund.
However, in the medium term, he expects the market will be driven by corporate earnings and global economics.
“The broader corporate margins were influenced last year by high input cost for manufacturing companies and high credit cost for banks. These factors should be reversing in 2019 and should support the valuation matrix to a great extent,” Singh said in an interview to Moneycontrol.
He further added that currently, markets have very low expectations from the vote on account as traditionally outgoing governments have not announced any substantial policy change in vote on account.
He noted that some nervousness related to the market is justified as the outcome of the general elections will decide the course of government policy initiatives which will have a long-term impact on the economy and ultimately on markets.
When asked on how the market would react if the present government does not get a clear majority, Singh said: “This outcome would not be a very happy situation and the market might initially react negatively.”
Sharing his views about the on-going earnings season, Singh feels that so far the earnings have been around the fund house’s expectations adding that the current quarter is expected to be better on a sequential basis.
On the question of whether investors should now look at investing in mid-, and small-cap stocks, the asset manager said: “Though in terms of valuation, large-cap indices in India are still at a premium to other emerging markets. However, the broader market valuations have turned cheap and offer great stock-picking opportunities including in the newly defined small-cap group from the long term perspective and hence one needs to be patient.”
In terms of sectors, the fund house is betting on consumer discretionary, industrial and industrial intermediaries, private corporate lenders.
Talking about oil and rupee outlook, Singh feels that the worst for both oil and rupee is behind us and the fund house expects both to stabilise around current levels in the near term.
Today, Indian rupee was at 71.10 against a dollar versus Jan 24 closing of 71.07 per dollar, while International Brent crude oil futures were at $61.89 a barrel or 1.3 percent, above their last close.
On bond yield outlook, Singh said that the Indian bond yields had responded well to the improving macro factors because of decline in crude prices and inflation undershooting the RBI target.
He feels that the chance of fiscal slippage in an election year is the only risk which the fixed income market is worried about.
However, fundamentally in view of global perspective, the bond yields around 7.5 percent offer great value in the long term, according to Singh.
He expects the Reserve Bank of India to turn neutral with an outside chance of a rate cut also.Singh suggested that at the current point investors should continue to invest in a staggered manner with an objective of long term wealth creation.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.