Mohit Nigam, Head – PMS at Hem Securities says they expect the market to close above the 18,000 mark before December 2021 ends. “The uptrend of Nifty50 looks intact and India is in the middle of a multi-year bull run. The small corrections currently faced by the market is an opportunity for investors to accumulate quality stocks.”
On the RBI monetary policy, “due to recent news regarding the new COVID variant Omicron there is a sense of uncertainty in the economy because of which we can expect RBI to keep the rates on hold. We expect RBI will be in wait and watch till the next MPC meeting in February 2022,” says Mohit Nigam who has exposure in the capital markets across forex, equities, bonds and investment banking.
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?
The RBI Monetary Policy meeting will be held between December 6-8, 2021 to decide on policy action. RBI stated in the previous MPC (Monetary Policy Committee) regarding normalization by taking care of excess liquidity from the system through enhanced VRRR (variable rate reverse repo) auction and suspending the G-SAP (Government Securities Acquisition Programme).
It was expected that in December RBI would hike the reverse repo rate to narrow the corridor between repo and reverse repo rate. However due to recent news regarding the new COVID variant Omicron there is a sense of uncertainty in the economy because of which we can expect RBI to keep the rates on hold. We expect RBI will be in wait and watch till the next MPC meeting in February 2022.
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Q: Do you expect further growth in industrial output in October 2021 after 3.1 percent growth in September?
Industrial output in September 2021 recorded 3.1 percent growth compared to the same period last year mainly because of the waning base effect, disruption from heavy rainfall, and the impact of semiconductor shortages on auto output. This is despite the pre-festive season inventory build-up suggested by the GST e-way bill data.
Going ahead, the IIP number will be reflective of genuine growth traction in industrial production with increasing economic activity and improved consumption due to the festive season and support from export demand that has aided the recovery in industrial activity.
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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?
Investor sentiment seems weak for Rakesh Jhunjhunwala backed Star Health as reflected in lower-than-expected IPO subscription figures. The issue is expected to list on discount and amid volatile broader market, selling pressure could further correct the stock price, mirroring listing day performance of Paytm.
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However, lower listing could be a good entry level as Star Health is one of the largest private health insurers in India, and the market segment is expected to be a key growth driver in the industry due to low penetration of health insurance and high healthcare costs.
Q: Are you bullish on RateGain Travel Technologies and is it rightly priced at Rs 405-425 per share?
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RateGain Travel Technologies is a leading distribution technology player in the travel and hospitality industry. The company has over 1,400 clients, including 8 global Fortune 500 companies. Some of its strengths include Marquee client base with long-term relationships, Innovative AI driven industry relevant SaaS solutions, Global and diverse management team with relevant technology and domain expertise. Some of the risks include revenue dependent on a single industry, client concentration risk, resurgence in Covid-19 and considerable contingent liabilities (~27 percent of revenues in FY21).
Coming to their valuation part, IPO price implies P/S (price-to-sales) of ~18x of FY21 sales. There are no listed Indian companies that have similar business but similar global companies are trading at P/S of ~14x of FY21 sales. We believe this premium valuation is justified due to the company’s scalable & profitable business model, strong customer base and bright prospects post pandemic scare. We believe investors should subscribe to this issue for the long term.
Q: Do you expect the market to close the year above 18,000 mark on the Nifty50, and why?
We expect the market to close above the 18,000 mark before December 2021 ends. The uptrend of Nifty50 looks intact and India is in the middle of a multi-year bull run. The small corrections currently faced by the market is an opportunity for investors to accumulate quality stocks. Nifty50 has followed a bullish rhythm since January 2021 and has given 22 percent growth so far this year.
We expect the government to continue spending on infrastructure, digital India and Make in India which makes Indian markets an attractive investment opportunity for FIIs and DIIs. On the revenue ground, Nifty50 companies gave strong Q2FY22 results and we expect stronger Q3FY22 earnings.
Seeing the financial conditions worldwide, we expect a good rally in the equity market by year-end.
On technical front as well, Nifty50 is standing on a strong support and is expected to continue its uptrend from the coming week.
Q: Do you think the Omicron issue will hit the market sentiment more or after some time the market will ignore this reason?
The volatility in the Indian benchmark indices witnessed a sharp rise due to the emergence of new covid variant. Investors have become cautious and are worried regarding the government’s stance on this new threat. The economic impact of Omicron will depend on government restrictions. Issuance of new travel guidelines have already started hampering the revenues of the tourism industry.
Developments regarding the entry of Omicron in India affected the benchmark indices on Friday as all the early market gains were exhausted. The initial scientific findings have suggested that the new variant is not life threatening and is a big boost to the markets and investor sentiments. However, inconclusiveness regarding the transmissibility, severity and vaccine effectiveness will keep the markets uncertain.
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 go overboard on these sectors and what are the stocks to buy now after recent corrections?
After witnessing sell off, expectations are that markets had bottomed out and expected to see a recovery rally, all of the above sectors will perform well. On a medium-term basis, we feel the best rebound can be in sectors like Metal, Finance, Pharma and Auto. Metal sector has been consolidating in the past 3-4 months but the sector outlook is better for 2022, and valuations are fair plus steel demand in India is expected to improve further by the government’s push for infrastructure spending.
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