Sumeet Bagadia, Executive Director, Choice Broking advised investors to turn cautious at the prevailing premium valuation and invest in fundamentally strong companies only, which are available at reasonable valuations.
Bagadia has over 15 years of experience in the Indian capital markets.
He expects cyclical stocks to outperform in next one year given the economic recovery. "Investors can invest in selective fundamentally strong stocks in cyclical sectors (excluding auto). Investors are advised to pick fundamentally strong stocks from IT and banking which are available at reasonable valuations," he said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q: After dovish Fed commentary, foreign investors returned to India last week. Considering the US economic data and Fed action going ahead, do you think the FII flow will continue in the rest of financial year 2021-22?
In near term, we believe FIIs inflows to continue amid dovish commentary by the US Fed. Government actions on keeping interest rates lower will be a key factor to decide the direction of FII flows. Considering the positive economic development in the US economy, we feel developed nations will start cutting monetary support by the end of this year which will trigger FII outflows. On the other hand, if developed nations adopt aggressive rate hike approach then it would be negative for Indian markets.
Q: New age investors continued to support the market in the absence of FII flow in August. What is your advice to these new age investors or are they very smart in decision making with respect to markets and stocks in current time compared to pre-Covid period?
Outperformance of the equity market is attracting individuals in India, leading to higher retail participation. Surplus global liquidity, vaccination pace and positive economic data are supporting the on-going market rally. At the prevailing premium valuation, we advise investors to turn cautious and invest in fundamentally strong companies which are available at reasonable valuation.
Q: Realty stocks gained more than 12 percent in last two weeks. Is it the time to add these stocks in portfolio or better look at other sectors for investment?
Investors are keeping realty sector stocks on buying radar as property registrations are witnessing improvement despite the second wave of Covid-19. Expectations of sustained business performance, record low interest rates and economic recovery are key factors attributed for the upbeat sentiments towards the realty sector. We have a positive outlook on the realty sector and expect demand to sustain going forward with the unlocking of the economy, improvement in vaccination pace and favourable government policies. Long term investors are advised to add fundamentally strong stocks in their portfolio and adopt buy on dips strategy.
Q: What are those sectors where the investment can be made now with a one year perspective and why?
With economic revival, we expect cyclical stocks to outperform in next one year. Investors can invest in selective fundamentally strong stocks in cyclical sector (excluding auto). Investors are advised to pick fundamentally strong stocks from IT and Banking which are available at reasonable valuation.
Q: Is it the time to turn cautious and book profits or remain invested in the market considering 10 percent returns from August?
Overall, the Indian equity market is continuing in a bullish trend, making all-time highs with strong liquidity. All the sectoral indices regained upward move, the Nifty Midcap index scaled to a fresh all-time high. A heavyweight Reliance Industries supported the index rally.
Hence, we are expecting that the Nifty may continue to remain in a bullish trend until we get any negative trigger in the market. However, the market has been trading above its historical average, so traders should trade with caution in the ongoing rally. At present, the key level of 17,500 could be a resistance while on the downside, 17,200 may act as support for the index.
Q: Considering the market at record high levels, do you think the market has more room to run further from hereon and touch 20,000 mark on the Nifty50 by FY22-end?
The Nifty index has shown a straight-up rally after crossing 16,000 levels and consolidated near 16,700 levels. After that, it continued its upside journey and made a new life-time high at 17,436.50 levels. Nifty has given a breakout of the rising trendline and is trading above the same, which suggests the strength in the counter.
On a weekly chart, the index has been trading with higher high & higher low formation, which indicates that decline is treated as buying opportunities. The Index has been trading above all the moving averages as well as all the key indicators like RSI, MACD & Stochastic are supporting the positive trend in the index. The index has been trading in uncharted territory. The psychological level of 17,500 could be a resistance, crossing above the same can show 18,000-18,500 levels in the near term while on the downside, 16,900 may act as support for the index.Disclaimer: The views and investment tips expressed by investment expert 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.