The factors concerning the market are upcoming US elections, continued rise in corona cases, and market valuations. These factors will continue to impact the market in October also, Naveen Kulkarni, Chief Investment Officer, Axis Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) Bulls have suddenly lost their grip on D-Street in September. Which are the factors that are weighing on equity markets?
A) The market has been volatile lately with significant corrections seen in the US markets. However, the bounce-back also has been very sharp in the market.
The factors concerning the market are upcoming US elections, the continued rise in corona cases and market valuations. These factors will continue to impact the market in October also.
Q) Are there any sectors where you are cutting your exposure after the recent rally?
A) We had reduced our exposure in the BFSI sector as the sector is likely to see the NPA challenges and stress in the forthcoming months.
The sector will also need to raise capital which will depress the return ratios. Thus, the near-term challenges are significant for the sector and thus our underweight stance on the sector.
Q) We have seen a flurry of IPOs in September. Which are the factors that one should consider while putting their money in an IPO?
A) Market recovery and themes like technology, Pharmaceuticals and Chemicals have been in flavor. Moreover the demand for mid and small-cap companies has risen.
Thus, the demand for IPOs has also increased. Some of the recent IPOs like Route Mobile have done better than expectations.
Q) Any big themes which can make a portfolio COVID-proof or insulated from external shocks, and why?
A) The COVID proof themes will continue to be Digital, Pharma, Rural and Consumer staples as they will continue to see improvement in business and COVID is unlikely to impact their business models. On the other hand demand for many of the categories is likely to increase further.
Q) COVID might go or fade out after a vaccine but scars on the economy will take time to heal? What are our views – do think there is a bigger problem which the Street is not seeing?
A) It is difficult to envisage the extent of the problems already in place and upcoming problems. Some are very straightforward which are known as NPA or the fiscal deficit.
However, what is unknown is the impact of these problems on future economic growth. So, that is a difficult aspect to model but we also see that the street is cognizant of the various challenges which has resulted in gross underperformance of the BFSI sector. However, as indicated earlier future problems cannot be ruled out at this juncture.
Q) After the recent fall with Nifty trading below 11K – do you think it has become ripe for investing or investors should look out for lower levels before taking a plunge?
A) Below 11k is a decent level to deploy funds as valuations start becoming reasonable. However, Q2FY21 results will be interesting.
The market could present more opportunities as we enter the US election season marked by high volatility and lower market levels might also be possible if the earnings season disappoints.
So, October will be an interesting month marked by market volatility on account of upcoming US Presidential elections, earnings especially for the BFSI sector, and local political events like the Bihar elections.
Disclaimer: The views and investment tips expressed by 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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