FII's outflow, slower domestic growth, weaker rupee, fiscal deficit are major concerns that should be addressed soon.
The 2002-2003 crisis in the US affected all global indices. Current economic environment is not that devastating as compared to that bear market. In the current scenario, the market is facing a healthy correction and we can see further upside ahead, Gaurav Garg, Head of Research, CapitalVia Global Research Limited- Investment Advisor said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q: The Finance Minister in a recent meeting discussed job cuts, auto inventory build-up and FPI surcharge with the PM. However, no firm action has been taken yet to revive demand. What should be the government's priority?
A: As per unconfirmed news, Finance Minister and Prime Minister had a good meeting and the PM is very optimistic about the outcomes of the meeting. It is anticipated that and the government is thinking on giving a major push to boost the economy by one-time stimulus package for real estate developers along with slashing of GST rates to 18 percent across all auto segments.
Along with these, repo rates have been slashed for the three consecutive times in order to maintain liquidity and cheap finance cost. The major announcement in the budget of increasing surcharge on FPIs is also under consideration, and we may see a rollback soon. A major relief for the stock market will be to increase the LTCG term to three years. These steps can help markets and economy gain positive momentum.
Q: Is the time right to invest in beaten-down marquee stocks or will you rather wait for a further fall to around 10,000-10,500 to pick quality bets?
A: Index has corrected around 10 percent from its highs and it is a good time to invest your 60 percent capital in good quality stocks, we may witness good upside from current levels and be ready to tap buying opportunities with the remaining 40 percent in case of dips.
Q: What is your take on the global situation? Is there a chance of equity bear market?
A: Global markets have remained subdued amidst the US-China trade war. Weakness in crude prices might be an indication of subdued global growth.
Also, a surge in gold prices and increased demand is a reflection that investors are looking for safe haven investments in the current uncertain scenario of global markets.
Discomfort in Hong Kong was a major concern in South East Asia, and Hang Seng underperformed all major indices. We may see more pain and downside in the equity market for the rest of the financial year.
Q: The market has been in a bear phase for more than a year now. Even largecaps have started falling. What is your view on this?
A: It would be premature to comment that the market is in bear phase. It is in a correction phase. Indeed the equity market was not able to generate good returns in the last year. More than half of Nifty stocks have tumbled from their highs and corrected more than 12-15 percent. But we may expect upside, as the government is trying to take measures to bring the economy back on track. We should start accumulating good largecap stocks.
Q: Are you still in the market for auto stocks or believe it is a structural slowdown, so it is better to stay away from these stocks?
A: As far as the automobile sector is concerned, without a doubt, it is in pain. Lower demand, high inventory pile-up, competition within the sector are major concerns that have impacted the whole sector. One should keep themselves away from the sector and wait for the turnaround. As the festive season is ahead, we may see some demand traction. But right now, it is a wait and watch situation for the sector.
Q: The insurance space largely outperformed that market in Q1. It currently consists of four companies. Will it grow much bigger in the next five years?
A: This sector has outperformed all other sectoral indices and interestingly SBI Life and HDFC Life are trading at their 52 weeks highs, despite negative returns elsewhere in the market. Government is also inclined towards giving a push to the sector to make sure that insurance reaches each and every person. In this regard, the government has also launched many schemes.
Earning and AUM of insurance sector witnessed tremendous growth along with an expansion in the bottomline. Based on the projected growth in the upcoming five years, we would not be surprised to see exponential growth within the sector.
Q: The market saw a bear market in 2002-2003, followed by a strong bull market. Is the market showcasing the same kind of environment now?
A: The 2002-2003 crisis in the US affected all global indices. Current economic environment is not that devastating as compared to that bear market. In the current scenario, the market is facing a healthy correction and we can see further upside ahead.
One should find the opportunity to invest in good stocks and start accumulating them. FII's outflow, slower domestic growth, a weaker rupee, fiscal deficit are major concerns that should be addressed soon.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.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.