Investors definitely need to adopt a cautious yet proactive approach in the markets. During such times of extraordinary volatility, and elevated fear levels, one is also able to get quality stocks at a bargain, Aamar Deo Singh, Head Advisory, Angel Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:Q) The first week of April was slightly better for markets compared to March. What is the way ahead for investors?
A) Markets have definitely a reason for cheer in the week gone by, with the benchmark indices up by almost 13 percent on a week-on-week (WoW) basis and many of the bellwether frontline stocks such as RIL, HDFC Bank, Bajaj Finance rose between 13%-15 percent while many leading Auto & Pharma stocks gained between 20%-30 percent on a WoW basis.
Also, the cash segment volumes on exchanges have increased by 35 percent plus, which clearly indicates that the buying interest has emerged as many of the quality names were available at relatively very attractive valuations.
So, it is a combination of both bargain hunting along with short covering that has led to this sharp rally, with the benchmark indices up by almost 20 percent from their lows.
The way forward is bound to be a cautious approach with likely profit booking to be seen in the weeks ahead. A silver lining has been the declining trend in coronavirus cases worldwide. However, it still would be early days to assume that all the impact has been factored in by the markets.Q) What are the factors which investors should watch out for the coming week?
A) Investors definitely need to adopt a cautious yet proactive approach in the markets. During such times of extraordinary volatility, and elevated fear levels, one is also able to get quality stocks at a bargain.
Events that investors need to keep in mind are the trends in cases of coronavirus, both in India as well as the world, as it has a direct bearing on the markets.
A declining trend would give solace and comfort to the markets that the worst is being factored in terms of damage caused by COVID-19.
Next, the US economic data releases the coming week, in terms of Retail Sales & Initial Jobless Claims could impact the US markets, in turn, affecting global markets.
So yes, we are in uncertain times and have to be prepared for any eventuality.
Q) Small & midcaps outperform - is it value buying which is leading to outperformance or the liquidity factor?
A) Small and medium cap stocks were the ones that were extensively beaten down during the carnage in the markets. Many of such stocks had corrected between 50%-80% from their highs.
However, the ones having value & perceived by investors as quality stocks available at attractive valuations were bought into. Floating stock is anyways less for many such small and medium cap stocks when compared to large-cap stocks.Q) One thing which we cannot close our eyes to is ‘recession’ as well as COVID-19 outbreak. Both the events are interlinked and will have long-lasting damage to the economies across the world including India. What are your views?
A) The COVID-19 pandemic has definitely pushed the world into recession as per the IMF, with the US being severely impacted, in the last two weeks alone, almost 10 million people applied for unemployment benefits, such a staggering increase has never been seen before, not even at the peak of the global financial crisis in 2009.
Even the data from the European economic powerhouses, Germany & France, have been far from encouraging, and as per the economic data released for these countries, both are headed toward their sharpest downturns since World War II.
Talking about India, Fitch has recently slashed its growth rate to a 30-year low of 2 percent from 5.1 percent for FY21. However, on a positive note, the United Nations trade report stated, that India & China, could be the likely exceptions in the developing countries, from facing recession.
But, it definitely comes out that the future is going to be challenging on all fronts, economically & psychologically, for one and all.Q) Which are the companies that are likely to see a V-shaped recovery after the lockdown?
A) Amongst the companies, expected to perform well, going forward, a few of them are:Asian Paints (APL):
APL has a strong brand recall and one of the largest distribution networks (60,000+ dealers). APL’s margins are expected to improve on the back of falling crude prices (more than ~40% within 3 months). APL has a strong balance sheet along with free cash flow and higher profitability.IPCA Laboratories:
IPCA’s 54% of revenue comes from domestic generic and API business. Generics and API continue to provide revenue growth for Ipca. The company is expected to outperform the Indian Pharmaceutical market (IPM) by 8%-10% p.a in FY 22.Bata India:
The Indian footwear industry is valued at Rs.50,000-55,000 crores, which is expected to grow at a CAGR of 15% going ahead. Two third of the industry is mainly dominated by the unorganized sector which suggests a huge untapped opportunity. The stock has corrected significantly from the peak, providing a good buying opportunityQ) Any technical trading ideas that investors can look at for the coming week?
A) From a short-term perspective with a trading view, Bharti Airtel can be looked at on corrections, buying around 450-460 levels with a stop loss below 411 and a target of 523.
Another stock that can be looked at from a trading perspective, is from the pharma space, CIPLA. Any correction in this stock, one can look at buying around 540-545 zone, with a stop loss below 490, and a target of 615.
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