Last Updated : Nov 16, 2020 12:06 PM IST | Source: Moneycontrol.com

'Higher liquidity and lower interest rates in global economy could keep FII inflows high'

On a YoY basis FY22 is definitely going to look strong, one is due to the lower base and secondly I expect FY22 to show good growth on topline over FY20.

Sunil Shankar Matkar

Assuming COVID vaccine would be fully available, Santosh Kumar Singh feels the markets may be on an uptrend given a) geopolitical uncertainty may be over with US elections b) Indian economic recovery has been sharp and c) High liquidity and low interest rates are here to stay for some time.

According to the Head of Research at Motilal Oswal Asset Management Company, FII inflows can remain strong as the geopolitical risk is falling. Also higher liquidity and lower interest rates in the global economy would mean that inflows may remain high, he said.

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Q: Market at record high levels. Do you expect Nifty to hit 15,000 on the Nifty before next Diwali after having strong run up in last six months, and why?

I don't want to talk about any specific Nifty target, however I think (assuming COVID vaccine would be fully available) the markets may be on an uptrend given a) Geopolitical uncertainty may be over with US elections b) Indian economic recovery has been sharp and c) High liquidity and low interest rates are here to stay for some time.

Q: Sectors which have not participated in the past rally also started attracting buying interest in current rally. Do you think one still made money and what are those key sectors for investment which could give double digit return or create wealth for investors by next Diwali, and why?

Markets tend to value stocks only when it believes the uncertainty is over, hence the first phase of recovery started with defensives and is now moving into cyclicals. Again I would not hazard the guess around percentages but would expect that a lot of value is still there in some of the cyclical sectors like financials, real estate and capital goods. Also, I would expect evolution of new themes due to COVID specifically in the digital space.

Q: Do you expect strong economic growth in FY22 after contraction in FY21, and why?

Given the recovery the base effect itself would mean that the economic growth would be sharp in first half of FY22. Also, the government's actions on creating jobs could lead to growth in FY22.

Q: FII inflow is one of key reasons for current rally. Do you expect more FII inflow in emerging markets including India?

FII inflows can remain strong as the geopolitical risk is falling, also higher liquidity and lower interest rates in the global economy would mean that inflows may remain high.

Q: How do you sum up SAMVAT 2076? What were the important developments from stock market perspective and what were your key learnings from Samvat 2076?

Last year could be termed as one of the most exciting years I would have seen, it has been a real roller coaster ending on an uptrend. The biggest development has been driven by COVID in the area of digital delivery, be it payments or consumers goods. Some of the key learnings are a) underestimating/overestimating the impact of an event and I would say I did both, underestimated this event in February and overestimated it in March and April b) If you believe in the long term don't get excited due to the short term trends and stories.

Q: Do you really expect strong earnings growth in FY22? What are your expectations for second half of FY21 and do you think the market priced in FY22 earnings growth?

On a YoY basis FY22 is definitely going to look strong, one is due to the lower base and secondly I expect FY22 to show good growth on topline over FY20. And due to the fact that COVID forced companies to go back on the drawing board on cost, I would expect some of the cost savings to stick meaning margin expansion. Hence we are talking about topline growth, operating leverage and financial leverage all three to kick in FY22.

Q: Will the Samvat 2077 favour largecap, midcap or smallcap, and why?

I would see next year to be more broadbased as the impact of operating and financial leverage is higher in the midcap and smallcaps. Also, the valuations in this segment is still attractive.

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First Published on Nov 16, 2020 12:06 pm
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