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Daily Voice | Five sectors look stable but stay cautious on tourism, aviation, says Abhijit Bhave of Fisdom Private Wealth

Robust fundamentals, easy liquidity and positive sentiments catapulted the domestic equities to lifetime highs in this month.

October 20, 2021 / 07:48 AM IST

Robust fundamentals, easy liquidity and positive sentiments have catapulted domestic equities to lifetime highs in this month. The BSE Sensex hit 62,000 mark and the NSE Nifty50 topped 18,600 level on October 19, rising more than 4 percent over September.

Full unlocking of the economy by the beginning of FY23 will give more leg to the upside for the stock market to sustain this rally, believes Abhijit Bhave, CEO, Fisdom Private Wealth.

"As the economy returns to normalcy, we would be better off, increasing allocations to stocks in the core and cyclical sectors like infrastructure, real estate, capital goods, auto, and BFSI," he shares with Sunil Shankar Matkar in an interview to Moneycontrol. Excerpts from the interview:

The market rallied around 50 percent in the last one year. Do you expect similar kind of return in the next one year as well?

Strong economic fundamentals, easy liquidity and an overall upbeat sentiment catapulted domestic equities to lifetime highs this month. Full unlocking of the economy by the start of the next fiscal year will give more leg to the upside for the stock market.

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The last year has seen many organisations reducing debt on their balance sheets, increasing operating leverage, and showing strong signs of strength in earnings momentum. All these point to the continuance of the structural bull run that the Indian equities are seeing.

At the same time, equity investments are prone to volatility and long-term wealth creation necessitates patience for riding through the short-term ups and downs of the stock market. For example, the investors who bore the brunt of the pain in the first quarter of 2020 have reaped the benefits of the rally.

This is a year of mega IPOs. A lot of money has flown into the system and more on the cards. What do you think of the primary market at this point?

The IPO market exploded in the first part of 2021, signalling the conclusion of a draught in the IPO segment that had been severely impacted by the Covid-19 scenario. The system's massive liquidity will eventually find its way into the stock market, providing the IPO rush an advantage.

Factors like the bullish environment, data about a significant number of unlisted companies achieving the unicorn status, a large number of new investors attracted to equity investing during the Covid-19 epidemic and the ability to obtain premium listings, I believe, would see the IPO market continue to rise uninterrupted.

With big-ticket listings like Policy Bazaar, Paytm, and LIC lined up for the second half of the financial year 2021-22, I believe, the next six-month period will outperform the first half in terms of fund raising.

Do you feel the inflation worries on rising oil prices and higher US bond yields on expectations of beginning of Fed tapering in November 2021 could spoil the party?

I think the Fed's balance sheet reduction and interest rate normalisation are already built to a certain extent into market prices and the taper tantrum is not a new phenomenon. The rise in interest rates is not expected to derail the momentum of Indian share since the Corporate India's profit trajectory appears to be stable.

Although the strength of the dollar index coupled with the increase in crude oil prices appears to be intimidating, it can act as a challenge for domestic equities in the medium run.

SIP inflow crossed Rs 10,000 crore for the first time in September 2021. Do you expect the flow to remain above the same in coming months given the increasing new-age investors count?

Available statistics indicate that India's mutual fund assets under management (AUM) as a percentage of GDP is among the lowest, at 12 percent and far below the global average of 63 percent. This shows a huge growth potential coming especially from the tier 2 and tier 3 cities.

According to AMFI data, individual investors held Rs 19.40 lakh crore in mutual funds as of August 2021, up 35.48 percent from August 2020, with around 16 percent of these coming from B-30 locations. With the AUM of the entire industry likely to increase by 12-15 percent between 2021 and 2026, we should reach around Rs 60 lakh crore in mutual funds alone, thanks to an expanded internet footprint and increased awareness of mutual funds as long-term wealth generators.

With the falling coronavirus cases and expectations of less impact of third Covid wave, do you expect faster recovery in economy in coming quarters? Will India surpass the RBI's growth forecast of 9.5 percent in FY22?

The number of reported Covid cases in India is largely under control, and the number of vaccinated population is also on the upswing, which offers us more hope for a faster full economic unlocking. In the fourth bi-monthly Monetary Policy Statement for FY2022, the Monetary Policy Committee (MPC) kept the repo rate unchanged and maintained an accommodative stance.

Despite the fact that GDP growth in Q1 FY2022 fell short of the MPC's estimate, the panel maintained its forecast of 9.5 percent growth for FY2022, owing to higher revisions in the forecasts for Q2 and Q3. We stay aligned with the report and actually expect the numbers to come in slightly better than projected.

How do you see sectors such as travel and tourism, hospitality, aviation and those that were worst hit by the pandemic from an investor's point of view?

Any bull market's foundation is sector rotation. As the economy returns to normalcy, we would be better off, increasing allocations to stocks in the core and cyclical sectors like infrastructure, real estate, capital goods, auto, and BFSI (especially some asset management and Insurance companies) but stay under-allocated to the tourism and aviation sectors for the time being.

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.
Sunil Shankar Matkar
first published: Oct 20, 2021 07:48 am

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