Siddharth Bothra, Senior Vice President – Fund Manager at Motilal Oswal Asset Management Company feels Covid-19 remains the key risk for the global and domestic market.
“Currently, market seems to be extrapolating a normalisation of economy, on the back of accelerated rate of vaccination. While fear of another round of lockdowns and business disruptions cannot be ruled out, the economic impact may not be as severe as we witnessed during the stage one,” he told Moneycontrol’s Sunil Shankar Matkar, in an interview.
Bothra has a rich experience of more than 13 years in research and investments. Prior to joining Motilal Oswal AMC he had an extensive stint with Motilal Oswal Securities as a senior analyst in the institutional equities division covering various sectors. He is the fund manager of Motilal Oswal Focused 25 Fund.
Talking about the queueing up new-business tech IPOs, he said, Over the next one year, we could witness many Indian Tech unicorns get listed in India, which could provide exciting investment opportunities for the long run, he said.
Edited Excerpts:-
Q: As we entered into the second half of 2021, do you think the momentum will continue in the market after witnessing nearly 13 percent rally in first half of CY21?
It is difficult to predict markets in the short term. The key aspect to monitor to our mind could be the pace of normalization.
Q: The first half of CY21 was an exciting period for the primary market as Rs 39,000 crore of funds raised via IPOs. Do you think the same kind of optimism will be seen in the second half of CY21 given the Rs 12,000 crore of IPOs already launched in the first half of July itself including Zomato IPO? What could be the total fund raising via IPOs in second half of CY21?
Historically, periods of prolonged vibrant markets lead to high activity in the primary markets. Hence, the current trend is not surprising and could possibly accelerate in 2HFY21. Going by recent fund raising announcements, it seems the primary market activity is likely to remain hectic in 2HFY22 as well.
Q: The Covid cases started increasing again in some parts of the world including Europe, signalling a possibility of beginning of third wave. Do you expect lockdown like situation in the coming period and as a result, is there any disruption in economic & business cycle?
This remain the key risk for the global and domestic market. Currently, market seems to be extrapolating a normalization of economy, on the back of accelerated rate of vaccination. While fear of another round of lockdowns and business disruptions cannot be ruled out, the economic impact may not be as severe as we witnessed during the stage one. As both the Government and the corporates seem better prepared for the same.
Q: The Midcap and Smallcaps outperformed the benchmark indices so far in 2021. Do you think the momentum will continue in the second half of CY21 as well?
The midcap and smallcaps had witnessed sharp correction over FY18-20 period, the sharp upmove in mid and small caps over the last one year, seem to have covered up the valuation arbitrage with the largecaps. We see more attractive risk reward in the large caps at this stage.
Q: What are the next emerging themes on Dalal Street that one has to start looking at now?
The recent global equity rally has been primarily driven by technology companies. However, investment options were limited in India. Over the next one year we could witness many Indian Tech unicorns get listed in India, which could provide new exciting investment opportunities for the long run.
Q: The economic reforms implemented 30 years ago significantly changed the course of economic policy in India. Do you think the current economic reforms will take the Indian economy to new highs?
Some of the key reforms undertaken by the Government over the last 4-5 years have laid down the foundation for the next leg of accelerated economic growth in India. We feel, these reforms have set a strong foundation for structural economic growth for the country.
Q: Do you think FY22 earnings performance will be much better than FY21? Also do you expect more upgrades than downgrades after Q1FY22 earnings?
The impact of COVID was more severe in FY21, given the sudden economic disruption. Hence, the economic impact was very severe across various businesses. While, the pandemic induced mortality impact has been much more severe in subsequent stages, our sense is that the economic impact has not been as bad. This trend coupled with 1) strong performance of few COVID beneficiary sectors, 2) turnaround in the commodity sector and 3) lower credit costs in the financials segment, should aid strong earnings revival in FY22.
Q: There has been too much volatility in equity funds inflow. Do you expect the equity funds to continue to get inflow in coming months?
Again fund flows like markets is difficult to predict. We are witnessing signs of increased financialization and this is a trend we believe is likely to sustain.
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