The market continues to punish those with weak corporate governance, high promoter pledged shares, poor earnings due to consumption slowdown and grim future
Investors should focus on fundamentally sound stocks with strong corporate governance, healthy balance sheet, comfortable valuations, and good growth prospects, Jayant Manglik, President - Retail Distribution, Religare Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Q: The Indian market witnessed a volatile week with Nifty closing flat. It witnessed selling pressure after reclaiming 11,800 on Thursday -- can we call that a ‘Dead Cat Bounce’?
A: It was indeed a tough weak as Nifty, but a sharp rebound on Thursday raised some hope of recovery.
However, it couldn’t sustain above the crucial hurdle of 11,800 and drifted lower in the following session.
Indicators point towards further consolidation in the coming week. Traders should prefer hedged positions and wait for further clarity.
Q: More than 300 small & midcap stocks hit a fresh 52-week low last week on the BSE. How should investors approach this space?
A: The fall in 300 stocks touching 52-week lows is no big surprise as the market continues to punish those with weak corporate governance, high promoter pledged shares, poor earnings due to consumption slowdown and grim future.
One can expect the trend of market rewarding good stocks and punishing risky counters to continue going forward
We expect mid/small cap indices to exhibit high volatility ahead of the upcoming Union Budget. Expectations would be high from Modi 2.0, in the backdrop of the rising unemployment rate, fiscal deficit concerns as well as liquidity issues.
The government is expected to bring out reforms which will help in putting the economic growth back on track.
Under such situations, keeping stock specific approach and investing in quality stocks in a phased manner would be a prudent idea.
Q: Selling continues in companies with high debt, as well as companies with high pledges shares, and NBFCs. What opportunities do you see in such scenario?
A: Investors should focus on fundamentally sound stocks with strong corporate governance, healthy balance sheet, comfortable valuations and good growth prospects.
The on-going liquidity issues in the NBFC space, high promoter pledge shares and high debt on the company’s books have significantly eroded investors’ wealth, especially within the NBFC space.
Furthermore, sectors like Auto, Consumer Staples/Discretionary, Metals are witnessing industry slowdown, while Pharma continues to face challenges with respect to USFDA approvals and drug pricing issues.
Under such a scenario, rather than targeting a specific sector for investment, the stock specific approach would be a prudent idea.
Some of the prominent names, which offer promising future and which could be considered for investing in phased manner include HDFC Bank, ICICI Bank, Dabur India, Britannia Industries, Godrej Consumer, Voltas, IGL, Maruti Suzuki India and M&M.
Q: What is your view on the market in the first six months and should investors stick to wealth creators of 2019 (so far)?
A: In the last six months, the NDA’s thumping victory with a clear majority for the second straight term proved to be very positive for the Indian markets.
It was expected that policies and reforms will speed up and that will help improve the fiscal situation and revive the economic growth. However, it has been below par.
Further, two consecutive rate cuts by RBI amid mixed global cues infused positivity in the market. This led to investors betting for fundamentally sound stocks with good management and stable business model and in few cases, in debt-free status.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.