In an interview with ET Now, Vibhav Kapoor, Group Chief Investment Officer, IL&FS talks about his outlook for the market and sectors that he would bet on.
Do you think in the near-term, Indian markets are headed lower?
Yes, we are at a pretty nervous situation as a market right now. The sentiment is negative, and the market is intent on focussing on any negative news, which comes in or any negative rumours, which come in as we saw yesterday in case of the Mauritius treaty. And the market is ignoring any positive news, so this is all a reflection of the fact that the sentiment is pretty negative, so we are at an inflection point. If the market continues to remain weak from here over the next couple of weeks, then you could really be entering into a situation where the market could go down much further over the next few months.
Considering your thought is that we are going to see significantly lower levels in the days to come, what is the advice that you are setting out to your clients, sit on cash because there will be better opportunities to get in into the market?
There could be. Right now the market is at an inflection point. It is really difficult to say whether you are going to see significantly lower levels or not. Because in one sense over the last say a month-and-a-half or so, the fundamentals have actually improved a little bit from what they were say three months ago. A couple of things have happened, one is that oil prices have actually come down by about 10-15%. International commodity prices are showing a weakening trend.
The monsoon has started off on a reasonable note, although it is too early. Corporate tax is up by about 20% in the first instalment as the figures came out last week. So all these are actually positive signs and showing them the fundamentals are not really deteriorating at this point of time. Yet the market has been going down because it fears that going forward, things are going to get worse, so right now it is at an inflection stage.
You need to really watch out what happens over the next few weeks, particularly the first quarter results, which come out in July and that will decide the trend for the rest of the calendar year. If you find that the markets are still weakening in July and going down say below 5200-5250 on a consistent basis, then you should really be looking out for lower levels. So right now it is time to be cautious not to really become adventurous and start buying because a lot of stocks do look attractive in terms of valuations. Probably wait out most part of July, see what sort of results companies come out with and then take a view.
In last 10 days, large-cap IT stocks on an average has corrected about 15%, why is that?
The market is fearing a slowdown in the global economy. We have seen a reasonable amount of bad news coming out of the US economy. And Europe, anyway, is in a problem, so the market is suddenly fearing that the slowdown in the US could accentuate further. And that would have an adverse impact on technology stocks because they get most of their businesses out of the US and Europe.
But probably the concerns are getting a little bit, the people are going overboard on the concerns. I do not think things are really deteriorating as far as technology company's business prospects are concerned in the US. But probably some of them had also become a little expensive and so they are in a corrective mode at this point of time.
So for next three months, which are the key sectors or themes you are betting on?
I really would not bet in a big way on anything for the time being till we get a clearer picture of what happens in the market but the sectors, which we generally favour at this point of time are things like telecom where the worst is over and things are going to improve as you go along over the next 12-18 months.
Infrastructure is another sector where things still do not look that good in terms of a very significant improvement in business prospects but valuations have become pretty attractive there. We are probably somewhere close to the bottom as far as that sector is concerned and that something one could look to investing gradually as you go along over the next 2-3 months.
source-economictimes
Steven
Management trainee-fundamental analyst
DENIP Consultants Pvt Ltd
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