DAILY VOICE | Major pent-up demand in travel & hospitality which is likely to pick up with unlocking: Naveen Kulkarni of Axis Securities

A) The speed of the market has been lightning quick. In the month of May, the market moved by more than 6 percent for the Nifty50 index while the broader market performed even better.

The quarterly numbers were encouraging and the earnings scenario continues to remain constructive. We believe that the market will continue to do well in 2021 but short corrections cannot be ruled out.

The key market themes of small & midcap stocks and large-cap value will continue to do well.

Q) Market is focusing on the unlock trade. But, will the scenario pan out somewhat similar to what we saw last time?  

A) The unlock trade will be quite interesting this time. However, it may not pan out exactly the same way as the last time. In the previous unlock theme, automobiles first performed then consumer discretionary while BFSI was the last to pick up.

This time it will be different as the pent demand will be varied across sectors. Small ticket discretionary could do well but the major pent-up demand is in travel and hospitality which is more likely to pick up with unlocking of the economy.

Q) What should be the ideal strategy now – should one book profits and then deploy cash at lower levels?

A) Some profit booking is advisable as earnings have not fully factored in the demand loss of Q1FY22. However, positives for many sectors have been factored in. Thus some profit booking is healthy.

Q) Which sectors are likely to lead the next rally on D-Street? Time for sectoral rotation and look at sectors that remained underperformers?

A) The market has seen a very high degree of sector rotation. Q1 is typically a strong quarter for the IT sector and it should see some growth.

FMCG companies take price hikes with a delay and should see a pick-up in growth with price hikes in the forthcoming quarters. So, defensives and BFSI could do well.

Q) What are the key risks for the Indian market in 2021?

A) There are a number of risks to the Indian market. The demand scenario will remain uncertain during the year.

This could mean negative surprises in the growth rate while inflation continues to rise. This could have an impact on the real growth rate and bond yields. Thus, there are real macro risks for the equity markets in the near to medium term.

Q) With markets at record highs have you increased or reduced your cash position compared to last month

A) We do not have significant cash positions but have done sector rotation quite frequently to manage the market volatility.
Q) Companies or stocks which stood out in the March quarter earning seasons according to you?

A) Wide range of companies stood out in the last earnings season. Amongst banks, ICICI and SBI reported very strong numbers.

Wipro delivered in the IT sector. Metals reported very strong numbers. Wide range of small caps and midcaps reported good numbers. The quarterly earnings season ended on a reasonably strong note.

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