Mohit Nigam, Head, PMS - Hem Securities, said that we are quite bullish on the market as technical setup remains strong.
In an interview to Moneycontrol’s Kshitij Anand, Nigam said that the index still trades above the crucial support levels, but we could see some volatility ahead if a third COVID wave strikes or any any other unanticipated macro-economic event occurs. Edited excerpts:
Q) What is your view on markets as Nifty50 climbs up 16K, finally! And, is the road bumpy or smooth for the index to touch 17000?
A) Indian market remained volatile in the month of July amid global cues but during the start of August, the Nifty50 touched its all-time high mark. Soon after hitting that mark, the index seems to be marching towards the upward direction.
We are quite bullish on the market as the technical setup remains strong. The index still trades above the crucial support levels, but we could see some volatility ahead if the COVID 3rd wave or any other unanticipated macro-economic event occurs.
But, the evidence indicates that bulls have had an upper hand. The 17000 mark could ideally take some time but 16400 levels can be seen in the near term.
Overall macroeconomic numbers are showing recovery trends which are also fueling the market.
Q) Nifty hit 15,000 for the first time on Feb 5, and since then it has been moving steadily. After hitting 16000 after 5-6 months - do you think we have hit a top?
A) As we can see India was hit by the 2nd Covid Wave during the month of March, April and May 2021 that was the main reason for the slow movement seen in the Indian Benchmark Indices but during that time also market remained stable and didn't tumble which gave a lot of confidence to the investors.
Earnings of Indian companies have largely met market expectations, with strong macroeconomic indicator numbers boosting market sentiment which makes bulls in control and directing the overall trend.
We expect the same momentum to continue in August as well -- so to answer your question, we still think there's upside left in nifty.
Q) What is your call on small & midcaps which also hit fresh record highs today, but have outperformed benchmark indices on a YTD basis? Time to be selective in this space? What are your views?
A) We can see continuous momentum in the Small and Midcap segment. Currently, we can see that the companies in this segment have shifted to a more growth-oriented and sustainable business approach which has helped in bringing the traction in this sector.
Technical indicators also suggest the uptrend in small & midcap space but in the near term, broader markets may witness minor correction or consolation as we can see some profit booking in the particular segment.
In our opinion investors need to be cautious in this segment as these stocks have great potential of appreciation in their prices, which comes with significant risk.
Investors should look for strong management, financial stability (strong revenue and profit), should invest in sector which they understand, and see vision-ability with proper selection and allocation be they key in this particular segment
Q) Any stocks which are looking good on a fundamental basis that investors can buy at current levels and why?
A) Here is a list of stock recommendations -
The company is the first and largest energy exchange in India with a nationwide presence and automated trading platform for physical delivery of electricity.
The company operates in a high growth market and with top line growth at the CAGR of 11% over the last 5 years. For the latest FY topline grew by over 20% on the back of volume growth.
Participant count increased from 4406 in 2015 to over 6700 in 2020, while energy trade increased from 28,124MU to 49,112MU during the same period.
The company also has a good operating margin of over 80% as per the latest quarterly performance. With reforms in the Power industry, increasing participation on the trading platform of the company, the company is expected to deliver strong topline growth.
Borosil Renewables –
It is the sole manufacturer of solar glass in India and with a Make in India focus led by anti-dumping duties and PLI scheme for domestic solar module manufacturing, it is set to multifold its operations in the coming years.
The company has already announced capacity expansion plans for up to 4 times its current levels.
Shakti Pumps –
Shakti Pumps is one of the leading brands in the solar pump space and also a major beneficiary of PM-Kusum Scheme which targets to install 37.5 lakh solar pumps in India in the coming years.
In the last financial year, it grew its business nearly 3 times with the help of the Kusum Scheme and an increase in exports. The management has guided to double its revenue to Rs 2,000 crores in FY22 with a healthy margin profile.
Agarwal Industrial Corporation Ltd –
Agarwal Industrial Corporation is India’s largest sector bitumen company. They have a robust fleet of transportation vehicles consisting of 650+ Fleet Size Consisting of 350+ Bitumen Tankers and 300+ LpgTankers.
We have seen a very strong financial performance from the last two quarters, the revenues and profits in Q4FY21 are more than double than in Q3FY21.
Vaibhav Global –
Robust performance over the last few years along with a rising market presence in multiple segments and multiple geographies.
Deepak Fertilizer –
FY21 Revenue growth stood at +24%, EBITDA doubled and Net Profit > 4.6x, Net Debt reduced by Rs 840 crore in the June quarter.
The Company is taking steps towards monetization of its other non-core assets i.e. real estate and stake in its step-down subsidiary.
FII and Promoter stake has continuously increased over the previous 4-6 quarters which is a positive sign. The company also obtained REACH registration that opens up the possibility of exports into the EU in the near future.
Godawari Power & Ispat Ltd –
Godawari Power is mainly engaged in the business of mining of iron ore and manufacturing of Iron ore pellets, sponge iron, steel billets, wire rods, H.B. wire, and Ferro alloys with the generation of electricity.
Fundamentally, it is a strong company with debt-free status. It posted strong financial numbers for the last 3 quarters with continuous increase in OPM and net profit.
Q) Which are the mistakes that one should avoid as market trade near record highs?
A) Retail investors often make the mistake of jumping onto the bull drive at the peak of the market. This should be avoided. It is crucial for long-term investors to select the right stock at a fair price to make the risk-to-reward ratio more favorable in the long term.
Investors should also avoid rumors and speculative stocks. Investors should always sit on some cash which can be deployed when these dips occur.
Looking at the current market investors should not sell off good quality stocks just because the valuations have become expensive with regard to its own historical parameters. They can keep getting costlier as the bull market progresses.Disclaimer – The stock mentioned in the above statement can be a part of Hem Securities PMS Fund. 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.