The recent market correction was driven more by macro narrative and volatility, and less by fundamental factors, Vaibhav Agrawal, Founder of Teji Mandi said in an interview to Moneycontrol. He also believes that “India is a secular economic upcycle. I also think that we are in the early phases of a capex cycle.”
Speaking on protecting portfolio from recession, Agrawal said investing in domestic pharma and consumer staples names would be helpful. Edited excerpts from the interview.
While the market is facing a significant correction and investors are still cautious of the risk factors, auto stocks have moved big time. Do you think auto sector has priced in most of the positives or the rally is not over yet?
Auto has been in a down cycle on account of both demand and supply side challenges. With demand bouncing back and supply side constraints such as raw material prices cooling and chips shortage reducing, autos should be on an upswing.
With reasonable expectation of monsoon and first normal festive season after almost 2 years, autos especially passenger vehicle (PV) and 2-wheeler should do well. Commercial vehicles are coming out of a severe down cycle after almost 5-6 years. The average fleet is 9.9 years old. Hence the upswing can be quite sharp.
Central banks across the globe are increasing key interest rates this year to tame inflation. However, few experts are anticipating a rate cut in the US in 2023. Do you also see this kind of possibility in India next year?
The situation is quite dynamic and volatile. Up until recently, the entire narrative was centred around rising interest rates and taming inflation. With some respite in inflation, the narrative has shifted to rate cuts.
Amid the possibility of an economic recession, it is likely that growth could take priority. However, we would have to wait and watch before jumping to any conclusions.
What are the sectors that can surprise the street in the June quarter earnings season starting off this week?
I think power, banking and capex related names can surprise on the upside.
Do you believe we are still in the bull run and the current correction is a part of long-term bull run?
Yes, I believe that India is a secular economic upcycle. I also think that we are in the early phases of a capex cycle. The recent correction was driven more by macro narrative and volatility, and less by fundamental factors. I think it is a correction in a long-term bull market.
Few experts opine that major FII inflows in India are likely only after 2024 general elections. What are your thoughts on this?
A lot of the FII selling in India had to do with China's relative positioning. Since China was in a lockdown and markets there had corrected by over 80 percent, India's relative weightage had increased. A lot of the selling was related to normalizing that factor.
What are the themes that can be protect your portfolio from recession?
I do not think that a recession is coming to India anytime soon. However, if you do believe that to be the case, then I would suggest investing in domestic pharma and consumer staples names that would be relatively unaffected by a recession.
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