The founder of Carnelian Capital Vikas Khemani has advised investors to stay away from metal and consumption stocks for some time. In an interview with CNBC TV-18, Vikas Khemani shared his views on the banking sector, automobile sector, and overall equity markets.
Are we at risk of seeing a much bigger fall in equity markets?
We are in uncertain times globally, there are so many issues that are moving simultaneously starting with geopolitical in Ukraine, lockdown in China, and inflation. This will keep markets uncertain and tentative. Some sort of clarity will come in next three-four months. The bigger concern of inflation still remains and it is likely to be more sticky. If China's lockdown issues persist for a long time, we can see more issues escalating on the supply side.
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Performance of IT stocks over next 12 months?
Results of IT companies have been fairly good across the board, except in one or two cases. If you listen to the commentary of all the IT companies, every company is guided by a robust demand environment. There are certain challenges in the shorter terms due to attrition issues. But those issues will settle down in the next few quarters as more freshers are coming in.
Outlook on the automobile sector?
Chip shortage is expected to come down. The auto sector will do good in the next 12 to 18 months. We also have to see how EV vs IC will pan out. We have been very positive on banking for some time especially at the beginning of this year for the simple reason that a marginal rise in the interest rates helps banks. Credit growth quarter on quarter is getting better.
India is coming out of a long credit cycle and it is going to sustain over the next three four-five years. Stocks have underperformed significantly in recent times which makes a case for reasonable performance in the next few years. So we are quite positive about both credit and non-credit financial services. Credit can deliver better returns than non-credit. The banking sector looks pretty good.
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Which sector are you negative on?
Metals can surprise on the negative side. we are beginning to see some sort of slowdown in the prices. As the conflict recedes, you will see commodity prices settling down. Risk reward for the commodity is not in the favor. To some extent, we will have to be careful. From a tactical perspective, consumption stocks may not do well for some time, but eventually, they will also do well once the supply side issues wither away.
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