Infrastructure has always been the focus area for the government, however, renewed emphasis will be beneficial. Digital infra and cybersecurity firms are making a lot of progress. Unfortunately, we do not have direct listed plays here, Satish Kumar, Head of Equities, Equirus Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
Q) Prime Minister Modi emphasized on Infra, fibre optics, cybersecurity in his speech on the occasion of Independence Day. What are your takeaways and how will it impact these sectors?
A) Infrastructure has always been the focus area for the government, however, renewed emphasis will be beneficial. Fibre is a pure commodity and prices are determined globally.
We have a few companies in India that make fibre. Having said that volume sales may go up but vis-à-vis prices, we are not sure. Digital infra and cybersecurity firms are anyway making lots of progress.
Unfortunately, we do not have direct listed plays here but having interacted with multiple companies who are working in the digital space I can safely say that ideas are awesome, and entrepreneurship will see a steep rise.
What we need is a secure incubation environment for these small firms. The government is doing its bit.
Q) Equity mutual funds see negative inflows for the first time in over four years. What could be leading to the redemption pressure in MF? Does it look like investors are cashing out or is it the liquidity needs which investors have to deal with due to job losses etc.? What are your views?
A) It is difficult to say whether economic hardships are leading to the fall in equity inflows from retail investors. However, it is common that after such a steep fall one will cash out at cost price and the same thing is happening vis-à-vis the liquidity inflow from the Mutual Fund customers.
Q) What is your take on the markets? Do you think we could see some selling pressure when the vaccine actually arrives? It will be a classic case of buy on rumours and sell on news?
A) I do not think the market rally is driven by vaccine news. It is the super easy liquidity in the global markets and that will continue.
Fluctuations in the market cannot be predicted but having said that if negative rates prevail in the US and FED does not start contracting its balance sheet it seems difficult to see a steep fall in markets.
Q) Which is the biggest risk for equity markets globally - the trade war between the US and China or the outcome of the US Presidential elections?
A) It is the strengthening of USD which is the biggest risk for equity markets. It can happen because of war or a severe increase in the pandemic. Trade war will not impact the USD in the near to medium term.
Q) What is your outlook on precious metals as a sector? Recently, it has got enough attention from D-Street. What is fueling a rally in metals, and are there any top bets which investors can bet on?
A) Gold had a phenomenal run and we have been very bullish on the same for the last couple of years. The negative real rate in the US is being priced in the yellow metal. The future course of action will depend upon the direction of the inflation trajectory, globally.
Growth may fuel inflation in the world where liquidity is overflowing. So, gold may pause for now however as inflation worries become a reality it may again start its upward journey, again.
Q) Market might not go back to levels seen in March, but what would be a good level to enter in case we see a selloff in equity markets?
A) There is no right time to enter the markets. Who could have predicted that markets will see V-shaped recovery after such big destruction in the month of March 2020?
For investors, I have one only piece of advice - BUY businesses that are likely to deliver growth and do not worry about market levels.
Q) FIIs are net positive so far in the month of August in the cash segment of equity markets as compared to DIIs who are net sellers? It looks like investors back home are getting an edge at higher levels? What are your views?
A) DII’s behaviour is a proxy to retail investors behaviour. After the steep loss, a recovery always triggers a sell-off near cost price. Many retail investors would have been trapped and they are taking money home at cost price, so DIIs are bound to sell.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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