The credibility of the banking sector is badly hit by the revelations of fraud at the topmost level of management. It will not be easy for the sector to gain the investors' trust again.
I would suggest investors have limited exposure to the banking sector and invest only in banks with a better track record like SBI, ICICI, Axis Bank and HDFC Bank, Romesh Tiwari Head of Research CapitalAim, said in an interview with Moneycontrol’s Kshitij Anand.edited excerpts:
Q) Indian market rose over 1 percent in the week gone by, do you think we are out of the woods? What should be the trading strategy of investors for the rest of the October series and what important levels should one track?
A) The lurking uncertainty of the revival of domestic demand is fuelling the volatility witnessed this week. Major steps taken by the Finance Ministry will certainly help the profitability of companies but the revival of demand is still unaddressed.
October will be crucial to understand consumer sentiments and the future measures required to boost trading activities.
For the rest of the month, the Nifty can trade in the range of 11,000 on the downside, and 11,700 on the upside in absence of any major news flow from the domestic or global front.
Trade war worries and data from the US economy is also affecting FPI trading activities in the Indian markets.
In October till date, the net investment from FPI is still negative after a negative September. Investors should not buy aggressively at these levels and consider hedging their long positions with put options.Q) Do you think any adverse decision regarding the trade war, over the weekend, could put bulls on the backfoot? We have seen plenty of volatility in the week gone by already due to trade war rhetoric?
A) Trade war news is surely affecting the sentiments of the traders but the fear of recession is also a major reason that is contributing to the rise in volatility.
The market is keenly watching the numbers coming out from the domestic economy, as well as, from the movers and shakers of the global economy.
Any adverse decision on trade war can easily pull the markets down and can push the Nifty below 11,000 in a quick time. The market is expected to remain volatile due to news flows this week.Q) Plenty of stocks have slipped from their 52-week highs in the S&P BSE 500 index since September 20 (breakout). What should be the selection criteria of investors in picking stocks?
A) Buying into stocks that recently slipped from their highs may be a good strategy for momentum traders but is not advisable for investors.
Investors should always look for stocks that offer good value and growth prospects for the price and that requires systematic research, patience, and financial discipline.
There is no fixed or iron-clad secret formula for picking stocks as the markets are by nature "unpredictable". Investors should always look closely at promoters and insiders' actions (buying, selling or pledging of shares) and motives for the same as they have a far better knowledge about how their company is performing at the moment.Q) What are your views on Infosys and TCS – which one is a better bet or investors should move funds to midcap IT?
A) I am positive on the IT sector in the current scenario and expect both Infosys and TCS to give good annual returns in the next couple of years.
Though the recently declared result of TCS was a bit subdued while Infosys result met market expectations. I think investors should buy into both on dips for better portfolio returns.
IT majors like Infosys and TCS are robust and can provide a comparatively secured return, while returns on midcap IT will be more volatile, so investors should choose according to their risk appetite.Q) Banking stocks are back in bear's grip due to the news flow and asset quality woes. What are your view and how should investors approach this sector now?
A) The credibility of the banking sector is badly hit by the revelations of fraud at the topmost level of management. It will not be easy for the sector to gain the investors' trust again and certainly not in the near future.
How can an investor value stock with the aid of data that can be entirely tempered and fictitious? I am not implying that all the banks are untrustworthy but the risk is far greater than the expected returns.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.