Marwadi Shares and Finance Ltd CEO Keval Bhanushali is not surprised by the rise in the US bond yields that are giving the market the jitters. The Federal Reserve balance sheet had assets of around $7.4 trillion in February 2021 against $4.2 trillion in the year-ago period and this is where the $3 package comes in, with all the currency being printed, says Bhanushali.
He believes the dividend yields will gain traction in the long term and balance out the rise in bond yields. In an interview to Moneycontrol’s Kshitij Anand, Bhanushali says improved GDP growth is promising but inflation remains a concern. Edited excerpts:
The Nifty50 consolidated in the previous week but the bulls failed to hold on to the gains. What led to the price action?
The market is getting impacted by the much talked about reason—‘the rise in the US bond yields’, but to me, this was no surprise. The US Federal Reserve balance sheet has assets of $7.4 trillion in February 2021 vs $4.2 trillion in February 2020, this is where the $3 trillion package had come from, with all the currency being printed.
The bazooka that Trump fired had to fire both ways. The US debt-to-GDP has risen to 136 percent, the highest in the history of the modern economy.
All this has to be brought back to balance and rising bond yields are just one means to do so.
The big cause of worry for equity markets is the rise in US bond yields that have surpassed S&P 500 dividend yields. Does it mean that high-flying equities have a relatively low-risk competitor? How will it impact Indian markets?
A) Rising bond yields in the US are definitely a concern for developing markets like India that have witnessed great FII participation.
However, I believe the equity dividend yields will gain more traction in the long term and balance out the rise in bond yields. In the short run, we can witness some selling or switching from equity to debt from the big FIIs.
The December quarter GDP data is out. How do you see the numbers and what are the takeaways for investors? Should investors focus on economy-related stocks?
It is definitely promising to see the GDP growth back in green but the real challenge is to keep inflation in check.
Investors should stay cautiously bullish at this time with a very precise sectoral investing strategy. Investors can look at private sector banks for medium-term investments.
Bharti Airtel looks like a very promising bet for the long term considering the duopoly in a huge data market like India. Airtel has managed to get its ARPU and active users back, which is a very good sign. We can see some strategic moves from the company in the future.
Crude oil is also trading above $60 a barrel. Which stocks are likely to gain and which will come under pressure and why?
The crude is likely to be in the same range or rather see a downward trend so, that may not be a big worry on the long term basis. Crude prices in the current world are more of the demand-supply management from OPEC.
Given the economies of these countries, I don't believe they will hold back the cuts for long. As for the current prices and the disinvestment plans of India, I see BPCL as a good beneficiary in the short term.
Based on the February series expiry, how is the March series likely to play out? Important factors or data points to watch out for.
We would recommend investors to stay long with strict stop loss at these levels. Any movement below 14,200 for the Nifty can lead to deeper corrections and convincing longs should be built up only beyond 14,900.
We expect Nifty to be within this range for the March series. A close eye needs to be kept on inflation data for February and US military action on Syria.