Ajit Mishra, VP-research at Religare Broking, says there’s more upside left for the markets if factors like the pace of vaccination and faster easing of restrictions continue. In an interview to Moneycontrol’s Kshitij Anand, Mishra advises accumulating stocks on dips instead of making any lumpsum investment at current levels. Edited excerpts:
What’s your view on the markets as the Nifty 50 climbs Mount 16K? Will the road to 17,000 be bumpy or smooth?
The Nifty has finally made a new milestone of 16,000+ levels after spending nearly two months in a range. Going ahead, we feel the up move would be gradual, given the surge in the last one and a half years.
Besides, the lingering fear of the third COVID wave would also keep the momentum in check. Meanwhile, the pace of vaccination and easing of restrictions from state governments would be important for the markets.
On the global front, the rising fear of inflation is likely to be an important factor.
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The Nifty hit 15,000 for the first time on February 5 and since then it has been moving steadily. After hitting 16,000 in 5-6 months, do you think we have hit a top?
We believe there is more upside left for the markets if domestic factors like the pace of vaccination and faster easing of restrictions continue.
This would help the economy to recover faster. Moreover, the banking index has underperformed recently owing to concerns over asset quality and growth.
However, if the economic recovery is quicker, we can expect the banking and financial space to lead the benchmark indices to newer highs.
Also read: Nifty's journey to 17,000 could be bumpy, but bull run could lift it to 18,000 by December: Experts
What is your call on small and midcap stocks, which also hit fresh record highs on August 3, but have outperformed benchmark indices on a YTD basis? Is it time to be selective in this space? What are your views?
Midcap and small-cap companies have gained strength and are continuously outperforming large caps due to better valuation and strong earnings outcomes. Further, improving demand conditions and economic growth getting back on track will continue to drive growth. However, we would suggest being selective now and invest in companies having growth potential, strong corporate governance, negligible debt and healthy fundamentals.
Also, we advise accumulating stocks on dips instead of making any lumpsum investment at current levels.
Also read: With Nifty at 16,000, realty and textile sectors are worth a look, says Abhishek Chinchalkar of FYERS
Any stocks that look good on a fundamental basis that investors can buy at current levels and why?
Here are two stocks that could be good long-term picks:
We believe CSB bank is well-placed as it has a strong gold loan book, a prudent management team and steady financials with improved asset quality.
Further, a well-planned strategy like betting on less risky businesses such as agriculture, food and service, and avoiding risky unsecured loans augurs well for future growth. From a long-term perspective, we are optimistic about the bank’s growth prospects.
The company has maintained its leadership position in the industrial segment as it has a strong backup for developing paints and resin formulations from its parent Kansai Paint Co. of Japan, which is one of the global leaders in the industrial coating segment.
Its strategy is to grow in both segments as well as gain market share from unorganised players on the back of positive sector trends, innovative products, focus on non-auto segments, increase distribution network and expand in newer geographies and in semi-urban and rural areas. Also, demand pickup and economic revival will aid growth for the company.
Which are the mistakes that one should avoid as the market trades near record highs?
With market sentiments being positive, there are many companies with not-so-sound fundamentals also gaining traction. We strongly recommend avoiding stocks with weak fundamentals, which are struggling with not only growth revival but also high debt and cashflow concerns.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.