Globally, equity markets have seen a sell-off on back of coronavirus fears spreading outside of China. Nilesh Shah, MD and CEO of Envision Capital, is of the view that the way local markets are playing out right now is more a reaction to how global markets are getting impacted. It has been a while since we have seen a correction of this magnitude but it is not for the first time, he said.
Over the last few years, we have noticed that corrections of about 10-12 percent have been part of a very normal course correction before the uptrend resumes, he said in an interview with CNBC-TV18.
"We now have an event which is the coronavirus which has impacted large parts of Asia and Europe but our sense is that probably if there is no incremental bad news further on this front, especially, if it doesn’t impact countries like the United States, which is the largest economy, my sense is that we might see some stability going forward,” said Shah.
"To some extent, it is probably a blessing in disguise that India is not so integrated to the rest of the world as ideally we should be. To that extent, our export intensity is a lot less. There would be some parts of the supply chain, which would get impacted and obviously it is going to affect those kind of businesses. It looks like is the two sectors which probably could get impacted the most are the auto original equipment manufacturers (OEMs) and some of the consumer appliance companies. However, two mainstays of India, which is consumer and financials get the least impacted and the corrections in these pockets does create some kind of a long-term accumulation opportunities," he added.
"I think the IT biggies are just correcting because they are part of the Nifty and there could be a Nifty-led sell-off. Therefore, Infosys and Tata Consultancy Services (TCS) will also get impacted. The non-largecap or the tier-II IT stocks especially the quality ones have not faced as much the brunt of selling pressure and their stock prices are relatively less affected," Shah said.
"So, I don’t think it is any challenge with the sector per se, it is just that these two biggies are part of the Nifty and therefore they are facing some unwinding or some kind of selling pressure. Otherwise, technology should be a safe haven in this environment," he said.
When asked how he would play the whole consumer space and what he would buy there, he replied, "Companies where valuations are lofty are still best avoided. My sense is they are at a specific threshold, if volume growth were to fall below this, it will impact valuations as well."
Source: CNBC-TV18
