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Daily Voice | Don't see repo rate going beyond 6% as inflation expected to ease, says Asit C Mehta's Anand Varadarajan

Anand Varadarajan of Asit C Mehta says inflation and recession continue to be a big worry for central banks across the board.

September 26, 2022 / 07:28 AM IST
Anand Varadarajan of Asit C Mehta Financial Services

Anand Varadarajan of Asit C Mehta Financial Services

Asit C Mehta Financial Services surely expects the market to be moving sideways, director Anand Varadarajan says in an interview to Moneycontrol. "With rate hikes pretty certain in the US markets, we can expect the same to happen in India as suggested before."

The financial services professional with over 20 years of experience believes India today is available at pretty attractive valuations. "So if we see some temporary blips also, we would suggest that as a strong buying opportunity," he adds.

On the monetary policy committee outcome, Varadarajan says: "We currently see a strong reason for the central bank not to go beyond six percent repo rate.

"The global prices of metals and crude oil have witnessed a sequential decline since mid-June following fears of a recession in major economies amid monetary tightening by central banks. This could help to ease some pressure on inflation numbers." Edited excerpts:

Do you expect the slowdown in the primary market to continue for the rest of the financial year due to an uncertain global environment?

Primary markets are closely linked to the market sentiment. The secondary markets have been volatile lately, which is why the demand for IPOs has been slow this year. However, despite volatile market conditions, the Indian IPO market continues to see new offerings from a diverse array of sectors.

As the market sentiment improves, IPOs and other activities will gain momentum. Investors find attractive buying opportunities in listed stocks, so there have to be compelling reasons to look at new listings.

Investors need not worry too much as there is ample opportunity in the listed space across sectors where stocks are available at attractive valuations.

Also readThis investment expert is bullish on these 3 multi-year broad themes

Do you think the RBI will not take the repo rate beyond six percent? If it takes the rate beyond six percent, then will it be a dampener to the economic momentum? Also will the RBI take a pause by raising the repo rate 50 basis points in the September policy meeting?

Inflation and recession continue to be a big worry for central banks across the board. With the US rate hikes certain, we can expect a cascading effect of that in India as well.

Economist Nouriel Roubini, who had predicted the 2008 financial crisis, sees a "long and ugly" recession in the US and globally occurring at the end of 2022 that can trigger fresh challenges.

However, India is better placed than its global counterparts and we currently see a strong reason for the RBI not to go beyond six percent. The global prices of metals and crude oil have witnessed a sequential decline since mid-June following fears of a recession in major economies amid monetary tightening by central banks. This could help to ease some pressure on inflation numbers.

Also readEconomic activity still below pre-pandemic level; RBI to slow down on rate cuts till next year: ADB

Is it time to turn bullish on the real estate space?

We have never been big believers in physical real estate. Real estate investment trusts (REITs) had presented an interesting opportunity but with the yields being abysmal, this sector is not on the top of our list.

Infrastructure investment trusts (InvITs) look attractive at the moment and will remain attractive for some time to come considering the infrastructure spend that's lined up in the country.

Do you expect Indian equity markets to consolidate in the rest of the calendar year? Also do you see any possibility of the market breaking June lows?

We surely expect the market to be moving sideways and with the rate hikes pretty certain in the US markets, we can expect the same to happen in India as suggested before. More than 33 million Puts traded on Friday the last week as per US data; this is the highest single day of Put volume since data began to be collected roughly 30 years ago. Such huge volumes on a day when US markets made 52-week lows suggests we may be closer to the bottom in US equities.

Also readRBI Policy Meeting – More volatility to rock Indian equity markets, yet India to remain outperformer

India today is available at pretty attractive valuations so if we see some temporary blips also, we would suggest that as a strong buying opportunity.

Do you think the making of smallcase portfolios with different themes/sectors is really a great help for retail investors?

Investing in equity markets in terms of stocks is something one must definitely do. However, this cannot and should not be done without professional help. Picking up the right kind of stocks and rebalancing portfolios periodically is critical too.

Are you super bullish on the banking & financial services space?

Banking and financial services are going to surely be at the fulcrum of India's growth story. Our growth vector capital enablers track this sector and has been doing consistently well. Having said that, going overweight in a particular sector or industry is never a good idea. Diversification is the only free lunch.

Disclaimer: The views and investment tips expressed by investment 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.
Sunil Shankar Matkar
first published: Sep 26, 2022 07:28 am