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DAILY VOICE | Give decent weightage to these 5 sectors while transforming portfolio: Vinod Nair of Geojit

A company which is well prepared to handle the future demand of this new world, like China plus one strategy, will do better. Generally, large caps & new generation companies are better placed & prepared for this scenario.

October 17, 2021 / 08:32 AM IST

Vinod Nair, Head of Research at Geojit Financial Services feels travel & tourism, hotel and aviation sectors are going to witness huge demand as the tourism sector re-opens. "My best call is on light operation cost & balance sheet companies with high penetration reach with online & internet business models," he said in an interview to Moneycontrol's Sunil Shankar Matkar.

Vinod Nair, who has more than 20 years of rich experience in equity research in India, said after the festival season, the focus would be on the global market with sight over upcoming FED & ECB future monetary policy.

"While transforming the portfolio, give decent weightage to manufacturing, power, tourism, chemicals, renewables energy & products," he added.

Q: The market rallied around 50 percent in the last one year. Do you expect the similar kind of return by next October 2022 and what could be driving factors for the same?

We don't expect the same type of rally because a lot of the future benefits are already factored in the current prices. At the same time, the outlook continues to remain robust, in anticipation of realizing the real benefit to the Indian economy from reforms, FDI inflows, fiscal spending and re-opening of the economy.

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Q: IT majors (TCS, Infosys, Wipro and HCL Technologies) announced their September quarter earnings during the week. What is your overall reading considering run up in stock prices and have you changed your earnings estimates for FY22?

The start to the quarter was weak, however the next set of results has been better than the street forecast. The long-term momentum of the Indian IT business continued to be healthy. Overall, the earnings growth has been marginally increased for FY22 & FY23, order pipeline is strong and operational efficiency is rising. All major IT players are adding headcounts to meet the high demand. We continue to have a positive rating in the respective top four IT companies.

Q: What is your advice to investors in current market scenario?

My advice is to adjust your personal portfolios into a balanced basket with high weightage to defensive stocks & sectors. Because one of the reasons for the ongoing rally is the ecstasy from high festival demand, which will normalize in the coming months. Post that the focus will be on the global market with sight over upcoming FED & ECB future monetary policy.

The Indian market is expected to get more stocks sector specific in the future. While transforming the portfolio, give decent weightage to manufacturing, power, tourism, chemicals, renewables energy & products.

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

Yes, it can spoil the market if the current high inflation, which is presumed temporary, extends to a medium-term cycle. And if the monetary policy turns hawkish & China’s slowdown derails the economic recovery, the effect will be much higher. The current market assesses that the effect will be soft in the long-term because the overall ingredient required for the market like a decent amount of liquidity, low- interest rates and fiscal support will be maintained.

Q: Midcap and smallcaps outperformed benchmarks by wide margins in the last one year. Do you expect the same outperformance to continue till next October 2022?

Mid & Small caps have recovered well. As per the last 5 years cycle, large & mid-caps have moved in tandem while on a near-term basis Midcap is outperforming. In such an expensive equity market, the market is likely to become more stocks & sector specific in the future. The outperformance of a stock will be decided based on the future earnings growth & business outlook. A company which is well prepared to handle the future demand of this new world, like China plus one strategy, will do better. Generally, large caps & new generation companies are better placed & prepared for this scenario.

Q: Is it the time to go overboard on sectors (including travel, tourism, hotels, aviation and many more) that were affected the most due to Covid-19 pandemic? What is your pecking order?

Yes, these sectors are going to witness huge demand as the tourism sector re-opens. My best call is on light operation cost & balance sheet companies with high penetration reach with online & internet business models. I feel they will outperform the heavily operational cost-based companies in the hotels & aviation sector. But of course, they are all going to benefit and outperform the broad market as footfalls rise.

Disclaimer: The views and investment tips expressed by investment experts 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 17, 2021 08:32 am

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