Mohit Nigam, Head – PMS at Hem Securities, says Indian markets are facing escalated downward pressure due to signs that central banks might begin draining liquidity from the system soon.
“Fresh rise in COVID-19 cases in various parts of European nations and resultant lockdowns imposed by Austria, weighed on sentiments,” he said.
The pressure comes in cycles and might be here for some time but it also gives the opportunity to invest in quality stocks when available at better valuations, says Nigam who has exposure in the capital markets across forex, equities, bonds and investment banking.
Q: Do you expect more selling pressure in the market given the consistent FII selling?
Yes the markets are sensing a bit of selling pressure from the FII’s actions but the move seems to be temporary. The fundamentals of the economy are still sound and better earnings can be seen in the coming quarters. Though valuations of some companies seem to be a bit stretched and due to slight market correction they are witnessing profit booking. The pressure comes in cycles and might be here for some time but it also gives the opportunity to invest in quality stocks when available at better valuations. Also this time around the DII’s were not able to cover the FII selling hence the pressure was seen with strong market wide downward movement.
Q: What are your broad expectations for November auto sales that will be released next week? Is it the time bet on auto stocks especially after strong management commentaries?
According to FADA, this year was the worst festive period (around 42 days) in a decade majorly due to semiconductor shortage. We believe retail sales for passenger vehicle (PVs) and commercial vehicle (CVs) in November may show improvement on a MoM basis as the supply chain situation is improving gradually coupled with strong economic activity.
Two-wheeler (2W) sales may witness negative impact due to poor rural demand and increase in product prices, hence we can see a slight drop in 2W and 3W space in November, 2021.
Recently management of many auto manufacturers not only in India but all across the world mentioned that this semiconductor supply is improving and the waiting period may come down now. So overall we believe that auto demand will improve in coming months and we can witness strong auto numbers all around the world.
Also read – Indian GDP likely boosted in July-September as lockdowns lifted: Poll
Q: What are the top walls of worries that the market is going to face in the coming months?
Indian markets are facing escalated downward pressure due to signs that central banks might begin draining liquidity from the system soon. With concern around this liquidity withdrawal, investors are unwilling to pay a steep price to own Indian equities. Fresh rise in COVID-19 cases in various parts of European nations and resultant lockdowns imposed by Austria, weighed on sentiments.
Internal factors like scrapping farm bills and heavyweight RIL announcing re-evaluation of the deal with Aramco also added to the sentiment. Indian markets have been one of the best performing markets compared to its global peers this calendar year despite the recent correction and going forward we can expect more inflow from foreign investors as the long term growth story of India is still intact and we are currently in a long term bull market.
Q: What is your view on the Star Health IPO that is opening on November 30? Is it overpriced at issue price of Rs 870-900 per share?
Star Health is one of the largest private health insurers in India with a market share of 15.8 percent for the latest financial year FY21. The company offers a range of coverage options for retail health, group health, personal accident etc, with primarily focus on the retail segment which accounted for 87.9 percent of the total Gross Written Premium in FY2021.
The company posted weak numbers in FY21, being an exceptional year due to withdrawal from a reinsurance treaty and COVID-19 crisis. However, the retail health market segment is expected to be a key growth driver in the industry due to low penetration of health insurance and high healthcare costs.
The issue does not seem overpriced at Rs 870-900 per share, with potential to outperform the peers on the back of one of the largest distribution networks comprising 779 branches and 11,778 hospitals across the country.
Q: How do you sum up the primary market that made records on several fronts?
Year 2021 can be called the year of IPOs as it has been the best year for IPOs so far. Out of 51 IPOs listed since January, 38 are trading above their offer price. Some of these debutants including MTAR Technologies, Sona BLW, Paras Defence have given multifold returns of 300 percent, 180 percent, 619 percent respectively from their issue price.
IPO of start-ups like CarTrade and Paytm listed below their issue price but we recommend keeping these upcoming businesses on radar as they can give good returns in near future.
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