Mitul Shah, Head of Research at Reliance Securities believes the market will remain firm based on various fundamental triggers, while some profit booking led correction is likely.
With the market near record high levels backed by stellar returns, he said, “one should focus more on valuation story rather than growth story as majority of the growth parameters are already captured in current valuation.”
Edited excerpts:
Q: Do you think the market is really overvalued now and can correct 10 odd percent in coming days before resuming further uptrend?
Market is trading at premium valuation currently in anticipation of robust earnings growth ahead with increasing vaccination coverage. We believe market to remain firm based on various fundamental triggers, while some profit booking led correction remains on card.
Q: Lot of reforms including telecom, auto and banks announced recently. Do you expect more such reforms in coming days that can really boost confidence of market participants?
Yes, all these reforms indicates government’s increasing focus on economic development and to support industry by relaxing policies and eliminating few hurdles for business growth. This would continue going forward.
Q: Do you think Evergrande will be a bigger cause for correction across the globe including India in coming days?
It is a short term concern primarily it is specific to China. It has indirect impact to global economy but magnitude would be limited. We don’t believe it would be bigger cause for correction for global markets including India. In fact, on the other hand slowdown in Chinese economy may lead to softening of commodity prices, which would provide benefit to manufacturing and engineering companies on raw material front, which in turn would improve their profitability going forward.
Q: Have you spotted any trend at FII desk or what are favourite and disliked sectors at FII desk now a days?
In recent times FII desk is bullish on IT sector and FMCG sector, they seem to be bullish on these sectors recently, while some profit booking is seen in Pharma sector.
Q: Have you spotted any sectors where one can start investing now with couple of years’ perspective, and why?
We are positive on engineering sector over next 2-3 years as economic activities have started picking up.
Q: Do you think expected Fed tapering will impact liquidity?
Fed’s decision on tapering would suck liquidity from global equities in 2022 and investment would start flowing to other asset class gradually.
Q: Given the market at record high levels, what is the investment strategy one should adopt now?
One should focus more on valuation story rather than growth story as majority of the growth parameters are already captured in current valuation.
Q: Do you expect some more correction in metal space in coming months?
It depends on magnitude of slowdown in China as China being largest consumer of metals globally. If slowdown further increases, it may put pressure on metal prices and metal stocks.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
