Aggressive lockdowns, vaccinations and drop in Covid cases should revive markets: Santosh Joseph of Germinate

Market Outlook

Santosh Joseph, founder and managing partner, Germinate Investor Services LLP said that a combination of factors, such as global lucrativeness and huge retail and domestic flows, are keeping the market from falling a lot. Many fear a March-April 2020 like situation of selling out and losing out. Therefore, the market is extremely nimble and delicate trying to be ahead of the curve.

Aggressive lockdown, vaccinations and drop in new Covid cases, supported by growth recovery should revive the markets in 1-2 quarters, he added.

Edited Excerpts:-

Q: The second COVID-19 wave disrupted a lot of sectors and there are some sectors which have not seen major impact. Which sectors should one consider for the portfolio and why?

Yes. Covid has been a serious disrupter, mover and shaker. Market dynamics and sectoral contributions have changed. From the initial flight to safety in defensives, sell-off in financials, to now major action in mid/small caps across sectors is seen.

It’s normal to see that FMCG, pharma and IT hold the fort while many discretionary sectors like entertainment, travel and financials take a hit.

I personally believe that though you can spot inflection points of sectoral changes, a balanced approach of having many sectors with appropriate weight is still the best way to navigate these markets.

For example, the much ignored metals sprung a surprise and many missed it or are joining the party quite late. Always better to be diversified than adventurous, unless you have a strong reason otherwise.

Q: The market has been volatile after seeing more than 5 percent correction from record high levels. Do you think the volatility will subside in the coming weeks?

The second wave progression is the primary reason for this volatility. I think the market didn’t expect such a nasty outcome, especially since the larger part of 2020 was well-managed relative to the global scenario. It’s only fair that there is a consolidation, probably on the lower side due to curfews, lockdowns in various state to curb the rising number of cases and casualties.

Aggressive lockdown, vaccinations and drop in numbers supported by recovery of growth should revive the markets in 1 or 2 quarters.

Q: Brokerages and rating agencies lowered their GDP growth estimates for FY22 due to disruption by the second COVID wave. What is your take?

This is tricky to call! And will keep updating largely based on COVID impact. Rather than chase the macro economic headline number, I guess it is better to focus on individual portfolios and use this opportunity to streamline or rejig the portfolio.

Q: What should be the investor’s strategy in the current circumstances, with respect to portfolio? Is it still a buy on decline market?

I guess this depends on the point of the investor’s journey. For someone who hasn’t started, this is a great market to begin and for others, like I said earlier, it’s time to streamline or rejig. Market will be at its best, being volatile on both sides, giving opportunities to enter and exit.

Q: India witnessed record additions of Covid cases on daily basis. But the market has not seen a proportionate fall. What are those supporting factors for the market?

We have a combination of global lucrativeness and huge retail and domestic flows that are keeping these markets sideways. Many are thinking 3 months to 6 months ahead. Hoping the cases will drop and markets will recover. Many fear a March-April 2020 situation of selling out and losing out. Therefore, the market is extremely nimble and delicate trying to be ahead of the curve.

Q: Any of the rules state by Warren Buffett and Charlie Munger that one should follow right now?

I think the biggest takeaways are discipline in their process of investing and making the most of the given opportunity. They are not afraid to not buy and when they buy, they take huge positions.

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