"The market may complete 10 percent odd correction in the short term looks likely but only after budget as everything will be entering in a lull period for few months after the budget," UmeshKumar Mehta, Chief Investment Officer at Samco Mutual Fund says in an interview to Moneycontrol. So far, the market lost 3.5 percent from a record high.
He feels microcaps and smallcaps are already showing signs of weakness.
Among sectors, he is bullish on the power sector. "The road map to increase power through RE (renewable energy) both solar and wind and green hydrogen should emerge as a mega trend for the next few years," says Umeshkumar with over 24 years of experience in the capital market.
Do you see any risk factor after reading the corporate earnings announced so far?
The risk of extrapolation by the investors that the same run rate of huge earnings growth will continue is the emerging risk as almost all sectors have done fairly well in the current quarter or half-yearly numbers. However, the risk is also emerging on the unsecured or personal loans side which has seen massive growth, and the RBI is well looking into it through appropriate policy measures. But the staggering Rs 48 lakh crore in the portfolio of unsecured loans which was just half four years ago is the reason to worry.
Corporate balance sheets have become stronger, but the finances of the masses could be weaker than ever before given the amount of debt they loaded up. Maruti Suzuki is having difficulty in selling mass-market cars, but premium cars are flying off the shelf.
Also read: Momentum mania: 12 new midcap stocks entered the Nifty 200 Momentum 30 Index
What do you make out of management commentaries, concerning the outlook for Q4FY24 and FY24?
Management commentaries are optimistic but remember they are coming from a high growth year; they too are sometimes coloured with recency bias. In IT, we saw divergent views in LTIMindtree and Infosys.
Companies from QSR (quick service restaurant) are still hopeful that inflation will subside and purchasing power for discretionary spending will increase this year, on the other hand, realty is gung-ho and is building in a more robust outlook. All in all, most are expecting a repeat of decent performance going forward.
Do you still see great value in the banking sector (PSU as well as private)? Have you spotted any concerns for PSU or private banks?
The banking sector was facing raw material problems in the year gone by when stock markets were booming and realty sales were at an all-time high. Raw material for banks is the cost deposits which was scares. This had led to costs increasing for most private lenders and NFBCs, however PSUs were partially spared.
Also read: Here are 68 stocks that turned multi-baggers from the last Republic Day
But when the tide tuns, banks will be in a better place both from a valuation perspective and growth which will come on the back of low base. PSUs are red hot now and can remain so, but from a long-term sustained wealth creation point of view private lenders now offer a better risk reward.
Do you think the market will complete 10 percent odd correction in the short term, before getting into the next leg of the up-move towards a new high?
Looks likely but only after the budget as everything will be entering a lull period for a few months after the budget. Microcaps and small-caps are already showing signs of weakness, not all stocks are participating in the rally, very few are still roaring but every day that number too is falling which can be said that markets are preparing for a correction.
Is the possible delay in interest rate cuts a major concern for the market or do you see any other risk factor (including banking) that's dampening the market sentiment?
Interest rate cuts, whether they happen now or in six months, are not a worry. The worry is frothy valuations in some of the capex driven sectors, autos, realty, power etc wherein too much of future growth is built into and when numbers don’t show up, the markets will inevitably disappoint.
Also read: Budget and Markets: Will the PSU rally continue post-budget?
Do you expect the government to announce more measures to boost rural demand, and infrastructure? Is it an important event (interim budget) to watch out for?
There is enough on the platter for the government to build infrastructure both in rural and urban areas, but this time something in the form of freebies for the rural or lower strata which can give a negative surprise to the market. This is an election year everything is possible.
Are you bullish on the power sector as a whole?
Yes, the power sector fundamentally lacked fresh investments in the last few years, stranded power projects etc on one hand and increasing consumption on account of digitization, smart phones, and EVs (electric vehicles). This led to shortages. The road map to increase power through RE (renewable energy) both solar and wind and green hydrogen should emerge as a mega trend for the next few years.
Do you want to wait for Q4 earnings before taking more exposure to the IT sector or is it the right time to enter?
IT as the sector is becoming a staple sector, we will have to have in our portfolio for sustainable compounding. In that longer-term mindset, it is better to buy when commentaries are negative and when others are reducing the exposure. This has happened in the last few quarters and therefore now it is ripe for a decent rise given the subdued interest rate scenarios across the world.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
