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DAILY VOICE | Expect healthy correction but Sensex may touch 65,000 by Q4FY22, says Prem Prakash of CapitalVia

With lower interest rates and the economy coming back on the growth trajectory, it seems an ideal time for equity investors, says Prem Prakash of CapitalVia

September 26, 2021 / 07:25 AM IST

Prem Prakash, CEO, CapitalVia Global Research, expects a healthy correction before markets resume their climb to record highs. Investors can book profits as of now, look for value-buying opportunities or opt for a buy-on-dips strategy, he says.

An MBA from FMS, Prakash is a seasoned investment adviser and is tasked with putting his company on top of the technical research in the financial advisory space.

In an interview to Moneycontrol's Sunil Shankar Matkar, Parkash says the Sensex can touch 65,000 by the end of FY22, with the upcoming festival season and the Q2 earnings expected to play a big role in the rally. Edited excerpts:

The Sensex has zoomed past the 60,000-mark. When will it hit 65,000 and what would be the supporting factors?

The Sensex hit the milestone of 60,000 on September 24, 2021 amidst the bull-run in the Indian markets. The level of 65,000 is not far away. We expect the Sensex to touch the level of 61,000 before a healthy correction till 57,900 and by the mid Q4FY22 or by FY22-end, we may see the level of 65,000. The festive season ahead and the Q2 earnings starting next month seem to be major factors that may support this rally.

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The Sensex has scaled Mt 60k and the Nifty is moving towards 18,000. What should be the strategy?

The benchmark indices are trading at higher levels now and the mark of 18,000 for the Nifty is not far away and the Sensex already touched the mark of 60,000. The resistance of the Nifty seems to be 18,000, as of now (looking at the option chain data).

The Indian markets seem quite overvalued as of now at a price-earnings (PE) multiple of 22.6 times over its estimated one-year forward earnings. According to Bloomberg, it is a 24 percent premium over the five-year average.

We expect a healthy correction before the indices start a bullish run and therefore investors may book profits as of now and look for other value-buying opportunities or investors with long-term perspective may opt for buy-on-dips strategy.

Given the more than 120 percent rally in the Sensex and the Nifty from March 2020 lows, is there a risk of a 10-20 percent or a bigger correction before the next major up-move? What are the risk factors?

On the domestic front, there seems no reason which may trigger a correction of 10-20 percent. The last few sessions saw a good participation of DIIs and FPIs, however, the Evergrande debt situation and the possibility of a slowdown in China may be a reason. The other reason which may trigger a minor correction could be from the earnings front—if there are any surprises.

The auto sector is the big underperformer of 2021. Is it time to start buying auto stocks and which are the stocks to buy?

The auto sector was indeed an underperformer in CY2021 but the charts suggest an impending bull run. On the daily charts of the Nifty Auto, one can see an Inverse Head and Shoulder pattern. The festive season is also expected to aid the sector, however, the semi-conductor shortage may cause problems. Therefore, investors should exercise a cautious approach and be stock-specific after seeing the earnings of Q2.

The September 2021 quarter earnings season begins next month. What are your broad earnings expectations for Q2FY22?

The recovering economy and the increased vaccination drive, which led to a stable Covid-19 situation in the Q2, seem favourable for the earnings and therefore, we expect the earnings to be stable, register decent growth and move towards pre-Covid levels.

Which are the pockets that one can look at for investment?

With lower interest rates and the economy coming back on the growth trajectory, it seems an ideal time for equity investors.

In the present scenario, IT seems a lucrative space, with the overall sector's outlook positive and the increasing role of digitisation it may turn out to be a good choice. With the introduction of the National Asset Reconstruction Company, a lot of stress has been relieved from the PSU banks and therefore BFSI space also seem to be lucrative.

Disclaimer: The views and investment tips expressed by expert 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, 2021 07:25 am

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