Indian investors should remain cautious amid constant rate hikes by the US Federal Reserve, global strength in dollar and surging inflation worldwide, says Gautam Trivedi, co-founder and managing partner at Nepean Capital.
In an interview to CNBC TV18, Trivedi said that he foresees the US Fed as continuing to raise interest rates to control record-high inflation, which will in turn induce the Reserve Bank of India to also raise rates.
Last month, the US central bank hiked interest rates by 75 basis points for the third consecutive time.
This could end up hurting domestic demand, which revived significantly in the last two quarters. Meanwhile, not raising domestic interest rates would further weaken the Indian rupee and cause more important inflation, he added.
"I think we should remain cautious...And I kind of feel bad for the RBI because they're stuck between a rock and a hard place," he said. "If you raise rates too much, you end up hurting domestic demand ... if you don't, then you're in a situation where rupee slides further causing more imported inflation," he said.
Trivedi believes that the Indian market is yet to see a downside and could certainly revisit earlier lows of the previous quarter.
"I think there's going to be correction in the markets ... and the level to which the Nifty drops is going to be a function of how much more money retail investors keep putting into the market," he added.
Talking about the auto sector, the analyst picked the passenger car segment as his preference given upbeat demand and strong number of orders in the segment.