The growing tensions in the Middle East is not something the investors have not seen before and sooner or later the markets will make a come back, Divam Sharma, founder of Green Portfolio, told Moneycontrol during an interview. However, the jump in Brent crude prices will be something the markets will be interested to keep an eye on, Sharma said.
Apart from the tensions, according to Sharma, the markets already are in an overvaluation zone and hence they are witnessing corrections. Retail investors can buy the dip, if the correction continues, he advised.
On the upcoming IPOs such as that of Hyundai, Swiggy, NTPC Green Energy, Sharma expects strong demand, as the pre-IPO market for the said companies is all heated up with demands from mature investors. There are huge transactions and an appetite for Swiggy, he said.
The fund manager is bullish on the healthcare sector. "Increase in awareness and willingness for healthcare spending is fueling the industry. This comes with insurance penetration which further gives the industry a boost," said Sharma, who has more than 15 years of experience in investment management, currently managing an AUM of over Rs 650 crore and AUA of Rs 350 crore.
Do you expect some consolidation in the market after several quarters of rally?
An overall market consolidation looks unlikely for some time. Markets have been riding on high horses and we don’t see any plausible reason for that to change anytime soon. We believe that consolidation can be stock or sector-specific. The flows still seem to be intact. Most of the interesting activity in markets is expected to be sector-specific as we await Q2 results. We are also seeing players in new sectors coming and the quarter-end performance will direct the way of markets.
What could be the possible risk for the market on the domestic front in the rest of 2024?
State elections are coming up in Haryana this month and Maharashtra in November, so there is some political risk but it stays very minimal. The US is electing its next president very soon and that is expected to have some impact on the markets globally. Global geopolitical uncertainty can end up guiding markets as geopolitical conditions continue to stay tense. There is also some global economic uncertainty right now but we believe Indian markets won’t see a long-term impact.
Is the geopolitical tension in Middle East a big risk for the market? Which sectors to focus in such situation?
This is not the first time something like this is happening. We have been seeing tensions in the Middle East for quite some time now. Markets have witnessed Isarel-Hamas, Russia Ukraine, Red Sea already but we always see markets coming back sooner or later. The rise in Brent Crude oil is something we’ll be interested to see. It has already jumped to $75 a barrel, still far away from a high of $91 this year. Apart from the tensions, markets already are in an overvaluation zone hence the corrections that we are seeing in the index.
If the situation escalates, we could see investors moving towards safe haven assets along with increased bond yields. It’s always recommended to diversify, be it sectors, market caps or investment classes. We recommend allocating a portion to defensive stocks and remain vigilant on companies which supply or source their materials from Middle East. Defense would also be a good pick as this only showcases the importance of self reliance. Retail investors can buy the dip, if the correction continues.
Do you expect strong demand for Hyundai, Swiggy, NTPC Green Energy IPOs?
Yes, the pre-IPO market for the said companies is all heated up with demands from mature investors. There are huge transactions and an appetite for Swiggy. The public issue market is seeing a strong investor sentiment. The recent KRN Heat IPO has also indicated a solid appetite. The trend for IPOs has now become so euphoric that a 100x subscription is normal. We foresee bumper appetite for IPOs will continue.
Do you expect significant fundraising in the rest of FY25?
Yes, we do, we are seeing a significant number of DRHPs being filed. The IPO boom is still going on and the investor appetite is not only intact but also increasing. Thus of course companies are capitalizing on this opportunity to go public now when the market is hot. Many main board and SME companies are lined up for listing.
Do you see any big opportunity in the electronic manufacturing and industrial goods sectors?
Yes, we do see it. Although FMCG, which is considered to be a defensive sector did not report results as expected due to low rural consumption, urban consumption is good enough to fuel the demand in the economy. We often talk about the concept of premiumisation when we speak of India’s growth story, and electronics is a very good sector to back that up. Festival season is coming and if you look at the financials of these companies, they already have a piled up inventory in their books due to forecasted demand. All these electronics, automotive sectors are going to benefit from the upcoming festive and wedding season.
Are you bullish on the healthcare sector?
Yes, we are. Increase in awareness and willingness for healthcare spending is fueling the industry. This comes with insurance penetration which further gives the industry a boost. We are also seeing a good push from the government front with PLI 2.0 for bulk drugs, bulk drug parks and Ayushman Bharat. This is aiding growth of healthcare players. The sector reported a good quarter with double digit margins and now, we are also seeing a lot of healthcare companies come up through IPOs.
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