Santosh Meena, Head of Research at Swastika Investmart says it will be interesting to see how RBI will keep balance in the December policy because growth is strong, there is some fear of inflation, Fed is sounding hawkish and worries on new variant Omicron is rising.
In this policy, there is a good chance that we may see a hike in the reverse repo rate because before raising the repo rate RBI has to bring down the corridor between the repo and reverse repo rate at 25 basis points from the current level of 65 basis points, says Meena who has more than 10 years of experience in the financial markets with expertise in technical & derivative analysis.
Q: Do you expect the market to close the year above the 18,000 mark on the Nifty50, and why?
We are in a bull market where we are seeing the first meaningful correction that has completed its 10 percent from highs of 18,604 at the low of 16,789. The recent low could be bottom or the correction can see further extension towards the 16,700-16,400 zone or even lower but this correction is a buying opportunity.
It is difficult to say that Nifty will close above 18,000 by the end of 2021 but I believe the second half of December is likely to remain positive for the market. Historically, December remains one of the best months where Nifty has witnessed an average 3 percent gain for the last 10 years.
Q: Do you think Omicron issue will get hit the market sentiment more or after some time the market will ignore this reason?
There are still uncertainties about the Omicron variant but the market would like to take the current correction as a buying opportunity due to the new variant if there is no major negative surprise. Some experts believe that the omicron variant could be a positive trigger for the market if this variant will be a mild version of Covid-19.
Q: What do you expect from the RBI monetary policy scheduled to be held next week? Do you expect the central bank to maintain status quo rates till 2022?
It is interesting to see how RBI will keep balance in the December policy because growth is strong, there is some fear of inflation, Fed is sounding hawkish and worries on new variant omicron is rising. In this policy, there is a good chance that we may see a hike in the reverse repo rate because before raising the repo rate RBI has to bring down the corridor between the repo and reverse repo rate at 25 basis points from the current level of 65 basis points.
In this policy, RBI may remain less accommodative citing inflation concern and hawkish US Fed. I don’t think the central bank to maintain status-quo rates till 2022 because growth momentum is likely to continue if we won’t see any major surprise on the covid front and there is some risk of inflation where now the US Fed starts to believe that inflation doesn’t look transitory therefore we can expect some rate hikes in 2022.
Q: Do you expect further growth in industrial output in October 2021 after 3.1 percent growth in September?
Economists are forecasting growth in industrial output for October 2021 is around 2.5 percent compared to 3.1 percent in September however I believe it may surprise on the upside.
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Q: Do you think the lower than expected IPO subscription figures will dent the listing of Rakesh Jhunjhunwala-backed Star Health next week? Will it mirror the listing day performance of Paytm?
Star Health, the largest private-sector health insurance company gets poor response due to expensive valuations, dent in profitability due to Covid-19 and fragile sentiments post a weak listing of Paytm. The listing is expected on a poor note however the long-term outlook for the industry and Star health insurance is promising therefore we can expect buying interest at lower levels.
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Q: Are you bullish on RateGain Travel Technologies and is it rightly priced at Rs 405-425 per share?
The company’s financials have been uneven during the last three years, with revenue rising to Rs 457.61 crore in FY20 and falling to Rs 264 crore in FY21. The company has suffered a loss in recent years on the back of COVID where the company reported a loss of Rs (20.1) crore in FY20 which even increased to Rs (28.57) crore in FY21.
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RateGain is the largest SaaS company in the travel and hospitality industry. The company suffered losses in the last two years. However, as things will normalize post-Covid, we see bright prospects for the company. The company has an asset-light business model with a strong management team. The company is valued at a P/BV multiple of 16x on its NAV of Rs 26 for FY21. Being a first-mover in the industry we assign a “subscribe” rating for moderate listing gain and long term.
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Q: Metal was the biggest loser with 13 percent loss in the last one-and-half-month, and other key sectors like Auto, Bank, Energy, Financial Service, and Pharma declined 6-8 percent. Is it the time to overboard on these sectors and what are the stocks to buy now after recent correction?
Metal stocks witnessed a decent correction on the back rising fear of new variant and the hawkish US Fed and there is still little scope of 5 percent more correction for Nifty metal index before it bounces back because its 200-DMA comes 5 percent lower from the current level. Banking and Auto stocks may witness sharp bounceback after a vertical fall because both are sitting at their 200-DMA while stock-specific outperformance can be seen in pharma stocks.
I believe Infra, capital goods, and realty stocks may outperform from here ahead of the Union Budget. KNR Construction, PNC Infratech, Action Construction Equipment are our top picks in infra space whereas Carborundum Universal, L&T, and Siemens are among the top picks in capital goods space.
Sobha, Brigade, and Prestige Estates Projects look strong as direct real estate players while Can Fin Homes, Polycab, HIL, Kajaria Ceramics, Century Plyboard, Pidilite Industries are some other strong stocks to play real estate theme.
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