Samir Arora on Fall: Markets are fine; US fall due to positioning; Fed commentary doesn’t change outlook

As for sectors, Arora said he is bullish on new digital players, capital market-related stocks, and IT.

The global market correction seen yesterday was routine, given that stocks had rallied significantly in the previous sessions. Veteran fund manager Samir Arora told Moneycontrol that the Fed's commentary was in line with expectations and does not alter the market outlook.

“A few basis point increases in inflation cannot be a reason for markets to get disappointed. The overall trajectory for rate cuts projected by the Fed yesterday was in line with market expectations of two rate cuts for next year,” said Arora.

He added that inflation is directionally on track and projected to hit 2 percent by 2026. “If it is 2.1 percent, it makes no difference,” he said, ridiculing the notion that the market correction was triggered by the Fed's commentary.

Arora attributed the fall in stock prices, particularly in technology stocks, to their sharp rise in the weeks leading up to the FOMC meeting. “On November 29, Tesla shares were quoting at $345. Yesterday, after the fall, it was at $440. Google was $170; after yesterday’s fall, it was $190. Amazon was $208 and closed at $220 yesterday. Meta was $574 and closed at $597 after yesterday’s fall. It was a natural correction after a sharp surge in stock prices with no significant change in data or expectations. It’s wrong to say this is triggered by Fed commentary.”

“Considering that stock prices went up without any reason, you can always say markets were upset with the fact that the Fed only reconfirmed what was expected and did not articulate the unexpected that could have justified the move in stock prices,” Arora said in his inimitable style. “Having said that, there is uncertainty over Trump coming.”

Regarding Indian markets, Arora said a 1000-point move on the Sensex should be “no reason to even reason,” as it is just a 1% loss. While markets may seem concerned about the rupee losing ground, he noted that India is on relatively firmer footing, as other emerging and developed market currencies have depreciated much more. “You look at any big or small market in the world, and the depreciation is more than that of India,” he said.

Arora expects the Indian market to flatline over the next month. “Largely, markets should be flat, but I would say I have a mildly bullish bias. Even a pre-budget rally is unlikely this time – there is hardly excitement over anything positive that could come about in the upcoming budget,” he said. He currently holds a 74% net position in his long-short fund.

As for sectors, Arora said he is bullish on new digital players, capital market-related stocks, and IT.