Binod Modi, Head Strategy at Reliance Securities, said that premium valuations of the market are likely to sustain due to various tailwinds, broad indices might see a limited gain in the medium-term considering emerging concerns from a possible reversal of soft monetary policy stance of global central bankers and high inflation.
In an interview to Moneycontrol’s Kshitij Anand, Shah said considering sustained earnings visibility led by a pickup in economic activities, we believe quality midcap and smallcap stocks should continue to outperform broader indices in the medium to long term. Edited excerpts:
Q) What are your views on broader markets that have hit fresh highs in August? Additionally, small & midcaps have outperformed benchmark indices by a wide margin. How should investors play this theme?
A) While benchmark Nifty crossed 16,000 marks and scaled new highs in the last couple of days, it was not a broad-based rally as midcap and smallcap indices contracted due to profit booking seen in these spaces.
We believe profit booking in these counters was broadly expected due to a sharp rally seen over the last couple of months.
However, considering sustained earnings visibility led by a pickup in economic activities, we believe quality midcap and smallcap stocks should continue to outperform broader indices in the medium to long term.
Q) Four IPOs will hit D-Street in the coming week – Care Trade, Nuvoco, Chemplast Sanmar, and Aptus value Housing. If investors want to invest in just 1 IPO which one would be a better bet for the long term and which one will you pick for listing gains?
A) We have assigned subscribe rating of Nuvoco Vistas and CarTrade IPO. While OCF yield at ~8.5% is quite impressive for Nuvoco Vistas, the asset-light business model and sound scalability augur well for CarTrade.
Q) The month of July closed with marginal gains but August started off on a flying note. Where do you see markets heading in August – important levels, and events to watch out for. Will August be a month of new high or a market top?
A) Benchmark Nifty has already gained over 16% in 2021 so far mainly on expectations of sustained earnings recovery.
While we believe premium valuations of the market is likely to sustain due to various tailwinds, broad indices might see a limited gain in the medium-term considering emerging concerns from a possible reversal of soft monetary policy stance of global central bankers and high inflation.
In our view, Jackson Hole Symposium on 26-28th Aug’21 will be the most crucial event for global equities.
Q) What is your view on the RBI policy and how will it impact markets? Can we say that rates have bottomed out? And, how will the commentary impact banking stocks?
A) RBI policy meeting outcome was broadly on expected line, wherein it continued to prioritize policy support to sustain economic recovery over inflationary concerns.
In our view, sustainability of the current low-interest-rate scenario is of utmost importance for economic recovery and economic recovery is equally important for banks to see higher credit growth.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
