Divam Sharma, Founder and Fund Manager at Green Portfolio says the equity market is expecting around 300 seats for NDA. If NDA attains more than 350 seats, it could be positive for the markets, he adds.
Among sectors, this is not the time to be experimental and invest in new age companies at sky high valuations, says Divam who is a Member of The Institute of Chartered Accountants of India, and had worked with banks including Kotak Mahindra Bank, Citibank, and IMGC in the past.
Divam, who has over 13 years of experience in investment management in stock markets, is still underweight in the IT space.
What is your investment strategy as the market approaches Lok Sabha election results?
We are staying the course and we remain invested. With that being said, we have taken advantage of this market and made many exits.
This is not the time to be experimental and invest in new age companies at sky high valuations. I am sure we will see many discrepancies uncovered. We have already seen this with an IT company. Many corporate governance issues will be uncovered, and I won’t be surprised to see huge corrections in many stocks as a result.
From the Q4 results, we have noticed an improvement in future outlook. Exports have picked up, manufacturing is doing well, the outlook of companies have improved, and the only issue in sight is the Red Sea trouble.
What do you expect from the Lok Sabha election and where will be the market from here on post results?
Markets have been witnessing a very high volatility amidst upcoming election results. Indian VIX has reached 24.18. Currently, we are seeing investors taking bets in the markets based on the speculations. Few months back, everyone thought that the expectations of the incumbent government coming to power again were already priced in but now the markets have started responding to the predictions and rumours around the seats NDA would get.
It could buy the rumours and sell the news as markets are expecting around 300 seats for NDA. If we do not see BJP attaining majority by itself, we could see some correction but if NDA attains more than 350 seats, it could be positive for the markets.
Are you going to change your bets after the election results?
The incumbent government’s major area of focus in the last decade has been manufacturing and infrastructure which align with its aim of making India Atma Nirbhar. Our investments align with the government's future vision and we plan on staying the course. We have seen a few stocks delivering multibagger returns owing to orders for government projects.
We invest in stocks and stories and not in markets. We firmly believe that if the stock has potential and is backed by strong fundamentals and management, it’ll perform sooner or later. We look at opportunities from a valuation perspective. Election impact will be temporary, if any.
Do you expect the run up to continue in the mid-small cap space, although the valuations are rich?
We expect the current rally to keep the momentum, although periods of profit booking are expected, the overall trend will remain positive. A key trigger for the rally will be the sheer amount of capex, that is enabled by the recent fundraise in the form of IPOs in the SME space.
Are you underweight or bullish on the IT space?
Yes, we are still underweight in the IT space. Given the recession and slowdown expectations in the West, IT companies in India have given feeble guidance.
It is quite interesting that top companies such as Infosys, TCS and HCL, on average, get more than 95 percent of their revenues from the West.
Hikes in interest rates by the Fed has made it difficult for companies to get orders from clients. We do not expect the Fed to cut rates before Q4, hence, we do not plan on adding IT to investment to our investment portfolio.
Do you see any possibility of FY24 GDP crossing the 8 percent mark?
If the incumbent government comes into power, we can see political stability in the country which could fuel the ongoing economic stability further.
Recently, an agency has increased India’s expected GDP growth by 10 bps. GST collections, rural demand, corporate sector growth, credit growth led capacity expansions by the companies can make it likely.
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.
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