I would recommend investors accumulate SBI Life Insurance in this downtrend for better than market returns in the next 5 years, VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) Another volatile week for Indian markets – with 8,055 as a base. What is causing panic in the markets?
A) Rising numbers of infections in the US, the fall of the US Indices, fear arising out of the super spreader event of Nizamuddin, is making the markets sulk.
We have handled the virus issue better than the US, UK or any other European countries and would have been celebrating the fall in the new infections after April 6 but that was not to be. Our vigil has now been extended.
Q) India’s Mcap-to-GDP ratio has now slipped below 2008 financial crisis levels – do you think the bottom is near? What is a good multibagger opportunity for the next 5 years if someone wants to invests now?
A) This is very interesting.
Yes, the market cap to GDP ratio today is around 0.53, which matches that of December end 2008. While the Nifty, in the current bear market has fallen 39.57 percent to its low, in 2008 it had fallen as much as 61 percent.
I would recommend investors accumulate SBI Life Insurance in this downtrend for better than market returns in the next 5 years
Q. What are your views on the month of April? Will we be able to see some green on the screen? Earnings will be delayed what are other data points to look for?
A) The results would obviously be delayed and will not be good.
The only thing going for the markets is that the positions are very light in the April series. In fact, we have started the April series with an Open Interest (OI) of just 240 crore shares in stock futures.
This is the lowest since October 2015. The number is 54 percent lower than the all-time high seen in February 2018 and 43 percent lower than the last series.
In fact, the Nifty50 has fallen in all the past four series, something that only happened way back in 2002. But when that happened, the 5th series closed in positive.
The main data to be diced and sliced are the new infection numbers. As and when we see a plateauing out of those numbers, markets should bounce back.
Q. What is your take on the auto sales numbers-do you think the pain is likely to continue in the sectors, and it is best to stay away?
A) The auto sector numbers were worse than expected, even counting the lockdown.
The sector has had no reprieve from the courts on liquidating their BS-IV inventory. They will get only 10 days after the lockdown is relaxed to sell their ware.
Q) Experts have suggested sticking with cash-rich companies. Do you agree with the statement, if yes, how will it help in dodging the COVID-19 bullet?
A) Cash-rich companies are great companies to back in uncertain times. As they do not carry the baggage of the interest on the debt, they will fare better in tough times.
Usually, they are available at a higher end of the PE spectrum but the current downturn has lowered all boats. So it’s a good time.
Q) What should be the trading strategy of the coming week?
A) For the coming week, unless the tide turns in the infection numbers, one should stick to what is working and that is Pharma. There are trading plays possible in the sector.
Q) What are your views on the financial space? Does it look like the smart money is moving from financials towards defensives' names?
A) Yes, the money is moving to Pharma and FMCG sector. Pharma stocks, which had lost the tag of "safe" stocks, have partially got it back, courtesy of the virus.
While the finance boys have been hit badly, but the better-managed ones will emerge stronger after the turmoil settles.
So, there is still a lot of time for these stocks to turnaround. Top banks with low NPAs and good margins should be picked again when the tide turns.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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