Dipan Mehta, Director at Elixir Equities Pvt Ltd, said that we are on the cusp of entering a period of multi-year growth in profits which is the ideal scenario for a sustainable and long-lasting bull market.
Here are the edited excerpts from his interview with Moneycontrol's Kshitij Anand:
Q) The Nifty50 hit a fresh record high above 15700 for the first time. What is your outlook on markets for 2021?
A) Despite all the gloom and doom caused by the second Covid wave, markets are in the pink of health. The bounce in the economy after the first lockdown was lifted is fresh in investors’ memory and the Street is pricing a similar recovery once the intermittent lockdowns are lifted and life limps back to normalcy.
In fact, the recovery will be long-lasting and sustainable because we have a massive vaccination program underway. The global economy would be strong and there will be good visibility due to confidence in handling future COVID waves, given all the lessons learned from the second one which was unexpectedly severe.
Q) Most states are relaxing restrictions slowly. What is the kind of impact you foresee on markets?
A) Well, it may not be similar as the restrictions will be spread over time and different states will deploy different timelines for unlocking so we will have an uneven step up in the activity.
The key factor to watch out for would-be consumer confidence and sentiment. If that is stable then we would be out of the woods.
We live in a very connected world and one sector can pull the other one up, just as the global economy can lift the Indian economy.
Q) What should be the ideal strategy now – should one book profits and then deploy cash at lower levels?
A) Buy at dips, and don’t try to trade unless you have experience and a successful trading track record.
Focus on stocks that correct from time to time even if the market remains range-bound. Risk return favors buying small/midcap stocks which have good management, corporate governance standards, and clean balance sheets
Q) Which sectors likely to lead the next rally on D-Street? Time for sectoral rotation and look at sectors that remained underperformers?
A) I think after many years we have a situation that every sector that has the potential and the underlying fundamentals to thrive.
Many key industries are undergoing silent structural changes which will improve their prospects and the cyclical upturn in the economy, after the setbacks such as demonetization, GST implementation & ILFS fiasco, is a very strong tailwind.
It just like a rising tide lifting all boats. Underperforming sectors of yesteryears could play catch up and show impressive gains.
Rather than sectors, a good bottom approach to buy stocks that have survived the ravages of the past 3 years. These could be winners, maybe even multibaggers.
Q) Which are the key risks that Indian market faces in the year 2021?
A) Apart from Covid and its impact on business and consumer sentiment, the biggest risk is inflation and the inability of companies to pass on cost increases.
Q) With markets at record highs have you increased or reduced your cash position compared to last month?
A) We are fully invested. It is an easy decision if you are already sitting on profits which helps build conviction to invest more remain invested through turbulences.
Q) Companies or stocks which stood out in the March quarter earning seasons according to you?
A) This (Q4FY21) and the last one were the best earning seasons we have seen in years in terms of breadth of companies and sectors reporting a revival.
If you analyze the common underlying factors driving demand you will see tentative signs that, notwithstanding any accidents domestically or globally, the multi-year stagnancy of corporate profits seems to be ending and we are on the cusp of entering a period of multi-year growth in profits which is the ideal scenario for a sustainable and long-lasting bull market.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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