While the overall economy has taken a hit because of the pandemic and the restrictions imposed by the government, some sectors have converted this threat into an opportunity and are set to see immense growth in the post-COVID era, Palka Chopra, Senior Vice President, Master Capital Services said in an interview with Moneycontrol’s Kshitij Anand.
Q) What is your take on markets as Nifty hit fresh record highs?
A) The Nifty50 index settled at a record high on improved prospects of economic recovery, encouraging quarterly earnings and positive global cues.
The market’s rise seems to be primarily based on the belief that the economic activities will soon reopen with the moderation in daily new COVID-19 cases in India and with vaccination picking pace the concern of COVID-19 will fade away.
The Nifty50 in the next week may continue its bullish move if it sustains above 15500 levels. Once this zone is crossed, it is likely that the index may consolidate near the 15600-15650 zone and may struggle to move beyond 15700.
However, once 15700 is breached on the upside a move till 15850-15950 cannot be ruled out but that will happen only above 15700. During the next week if the index falls below 15400 it may move southwards till 15250.
If the downward journey continues below 15250 the index is likely to move till 15000 levels. Call writing in the options can be seen in 16000 & 15800 strikes whereas put writing can be seen in 15000 & 14500 strikes.
Q) How did you fall in love with D-Street? Your first trades and subsequent lessons?
A) I have always been interested in the financial markets, growing up financial markets were the dining table talk in our household.
During my educative years as I was specializing in investments and finance, it was a very obvious choice to gain some practicality by participating in the markets.
I started off easy with SIPs in mutual funds and that’s how my interest in wealth management and financial planning started.
Subsequently, I started exploring stock markets and learned the importance of stop losses, booking profits on time, not being greedy, and never following the herd, all these have been such interesting and important lessons, which one can only gain by falling and rising up again.
Q) BSE MCap rose over $ 3 trillion – when do you foresee 4 trillion for Indian bourses?
A) India’s stock market – crossed the $ 3 trillion level due to excessive liquidity in the economy. US, China, Hong Kong, Japan, UK, France, and Canada have a stock market capitalization of more than $ 3 trillion and now, India has also joined the top 10 list in market capitalization globally.
At this record of $ 3 trillion level Foreign institutional investors have been selling in the Indian market whereas Domestic institutional investors (DII) continue to invest due to optimism in mid & smallcap stocks and corporate earnings.
$ 1 trillion market capitalization level was hit in 2007 and $ 2 trillion levels were hit in 2017. It reached the level of $ 3 trillion from $ 1 trillion after 14 years.
With demand steadily increasing, economies re-opening and with the increased pace of vaccinations, the interest in stock markets is here to stay.
The ease of doing business, infrastructure creation, and positive fiscal policies will help in driving the growth of our economy. If this bull case scenario continues, it might be possible to hit $ 4 trillion levels by end of Dec 2022 or the beginning of 2023.
Q) In terms of valuations — Nifty 12M fwd P/E at a 10% premium to the long-term average. Do it suggest caution or do you think with earnings likely to play catch up these valuations could stay?
A) The price-earnings (P/E) ratio is quite prominently used by investors while investing and one of the most widely used value indicators. Current PE of the Nifty around 29.5 and in terms of valuations — Nifty 12M fwd P/E at 10% premium to the long-term average.
In times like these, the investors should stay invested in high-quality stocks with good balance sheets and typically with market leaders because those are the ones who will survive in the long run.
Try and book profits in stocks that have performed well and are creating big greens in your portfolio. Profit booking at the right time goes a long way.
Q) Small & Midcaps seems to be hogging the limelight – what should be the strategy?
A) Small & midcaps have been at the top of the charts for almost a year now, after underperforming the large caps for almost 3 years.
Small & Midcap’s performance came due to better quarterly results than expected and due to comparative lower valuations. The rally was led by strong participation from FII and DII and retail participation was also a key driver for this rally.
The rally is likely to continue as a result of fewer economic restrictions and vaccination drives happening across the board. The investor should invest in fundamentally strong smallcap and midcap companies in the near future keeping in mind the valuations of these companies.
Investors should keep in mind the volatility and should not get swayed by the abnormally high returns. One-year returns should not be the only reason to invest in any company. Investment should be done by proper planning and considering one’s own risk appetite.
Q) Sectors that are likely to participate in the next trillion? Which are the budding themes amid COVID?
A) Many industries were accelerating at a normal pace across the world before Covid-19 happened. While the overall economy has taken a hit due because of the pandemic and the restrictions imposed by the government, some sectors have converted this threat into an opportunity and are set to see immense growth in the post-COVID era.
Owing to the lockdown, all non-emergency treatments have taken a back seat. Healthcare sectors have faced big hardships this year especially in India.
But, this sector is here to stay and will grow post-pandemic as people will now realize the importance of health protection and hygiene. Medical aid is required irrespective of the economic condition and the pandemic has been an eye opened in that sense.
IT and Telecom
People have started using digital mediums during the course of pandemics for their work commitments, education, and entertainment. Massive popularity is seen for online platforms for work meetings due to work from home scenario. This has also facilitated to start of online education and assessments. Due to lockdown IT sector has really seen a boom like never before.
More and more Indian consumers are adopting digital technology and this opens up huge areas of opportunities in sectors such as healthcare, retail, education, finance, and banking.
As the Digital India initiative takes shape, demand for technology-related services is expected to increase such as building the broadband infrastructure; creating identity solutions, payment systems, web or mobile-based delivery structures, and so on.
FMCG & Retail
This sector has seen growth even in the time of the pandemic. Food-based retail chains and essential commodity providers have emerged as winners. Given the heightened need for immunity-boosting products and healthy food among consumers, has created a new product basket for these companies to focus on.
The chemical sector can also provide a very good option to the investors as global investors are moving out of China and now eyeing India as a potential market. An increase in India’s global market share in this sector indicates a great future in the chemical business. Also, the increased demand for drugs, disinfectants, and medicines due to the pandemic, has given a new opportunity to this sector.
In the international markets, Steel and Iron prices have gone higher. Due to this, metal stocks are expected to do well in the immediate short-term to medium-term. The rising trend is expected to exist for at least six months and hence investment in metal stocks can be considered for short-term to medium-term time-horizon.
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