On the defence, "we are positive from a medium to long term perspective. With indigenous orders increasing to substitute imports along with higher percentage allocation in the budget, the sector has seen strong traction," Vivek Goel, Joint Managing Director at Tailwind Financial Services says in an interview with Moneycontrol.
In terms of top picks from a value perspective, he believes the banking and NBFC sector look attractive where valuations are lower than their pre-Covid levels.
As we see interest rates peak and credit growth continue, the sector should be a key driver in taking markets to a new high in this financial year, says Vivek who works closely with investors in managing their portfolios.
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Q: Do you still expect major challenges on the global front which can keep the equity markets away from their record highs in 2023?
We are cautious about inflation surprising negatively as OPEC has been supporting oil prices by announcing cuts. Global monetary policy is between trying to curb inflation while maintaining banking system stability and while the US Fed might take a breather with some cool-off in the most recent reading, the UK saw a 10 percent+ print and continued to be under pressure to hike rates.
Going forward, inflation will continue to be a key driver for global banks in shaping their policy and this will continue to play on equity market participants’ outlook. Lastly, geopolitical risks are another factor that may impact markets as currently this is not anticipated or priced in the markets.
Q: Is the RBI still worried about inflation, though it seems to have shifted its focus on growth from inflation?
While we saw a pause in the recently concluded MPC (Monetary Policy Committee) meet, the RBI Governor did state that it was a pause and not a pivot in their stance to withdraw accommodation. Minutes of the meeting released by RBI highlight that members remain wary of inflation outlook due to uncertainties around international crude prices, domestic monsoon impact on food prices and sticky core inflation.
However, in our view, despite these uncertainties, there are positives on the inflation front that will help RBI continue with the pause on rate hikes and keep interest rates unchanged for longer.
Q: Are we near the last leg of the bear phase for the IT sector?
The valuations of several large-cap IT stocks have corrected from their post-Covid highs, as outlook from global markets is continuing to be uncertain with the risk of a recession looming on IT spending.
We might see some more impact over the next couple of quarters in terms of price or time correction as global macroeconomic developments provide more inputs to understand the impact on growth and thereafter the IT sector might start to see some recovery gradually.
Q: Do you think gold is the best hedge against currency?
Gold has been performing well in these uncertain times and with inflation continuing to keep policymakers on their toes even as there are worries about the global banking system, gold should continue to act as a good hedge against some of these risks.
Q: Are you super bullish on the defence sector?
We are positive on the sector from a medium to long-term perspective. With indigenous orders increasing to substitute imports along with a higher percentage allocation in the budget, the sector has seen strong traction.
Over time as capabilities of various products continue to improve, larger orders will continue to keep driving growth.
Q: Where do you see the value emerging among sectors, for FY24?
While valuations have come off from their highs in 2021, we still see sectors where valuations are rich. In terms of our top picks from a value perspective, the banking and NBFC sector look attractive where valuations are lower than their pre-Covid levels.
In a rising interest rate environment where several global banks have been impacted, the Indian banking system has remained stable with a sound balance sheet. As we see interest rates peak and credit growth continue, the sector should be a key driver in taking markets to a new high in this financial year.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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