The Market Podcast | Dalal Street will bounce back, right time to accumulate ‘jewels of India’

The Indian market might have given a mixed response to the measures introduced by the Reserve Bank of India (RBI) on Friday, but these are strong measures and will help India back on its feet much quicker than other global counterparts, Shailendra Kumar, CIO, Narnolia Financial Advisors, said in the ‘Market podcast’ with Moneycontrol.

The bottoming out process for Indian markets has already begun. “We turned positive on Indian markets on Tuesday and the primary reason is that FPI selling is likely to reduce now, which was the primary reason for the fall in the first place,” he said.

Most of the money which was flowing out was the ETF selling and India has a 10 percent weightage in the emerging market basket. With the introduction of the stimulus package from the US Fed, where they said they would buy corporate bond ETF, the move is likely to calm nerves of global investors, Kumar said.

Indian equities, having 10 percent weight in emerging market ETFs, suffered the collateral damage. This high selloff in such a short time span cannot get matching domestic buyers.

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Shailendra Kumar

Chief Investment Officer|Narnolia Financial Advisors

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This sharp fall in all the liquid investment asset classes happened as most of the corporations and investors moved towards cash (‘move to cash’ trades) to tide over the near term pain of a standstill economy.

He added that the fall is good for long-term investors because India should be able to get back on its feet in a quick time, and the time is right to accumulate jewels of India.

“History suggests that humanity has always won, and this too shall pass. No doubt the economy is in a difficult zone and we might be staring at a negative GDP growth in the next quarter. But, the long-term story remains intact and this is the time to buy the jewels of India,” Kumar added.

Investors should look at buying the companies where there is a strong business model, and management credibility is very strong.

COVID-19 is a threat to humanity and damage to the underlying economy is significant. Being the barometer, the equity market has fallen in tandem with this Black Swan event.

But the valuation compression is significant and the market has extrapolated current economic pains even for long-term earning potentials of the companies.

On a simplified basis, any price below the Nifty levels of 9,500 is an undervaluation level, though when the market is not in a normal rational state, it can show us any price but those surely would not be a long term reality.

(Tune in to the podcast for more)