Abhay Agarwal, Founder at Piper Serica, says as the economy continues to open up, they expect consumer discretionary demand for real estate, automobiles, home improvement, travel, etc. to pick up significantly and provide more power to the overall economic recovery.
The market has been range-bound for more than one-and-half-months, especially after hitting record highs. “We do not expect the market to develop a strong positive momentum till the FPIs stop selling,” says Agarwal who has nearly three decades of experience in the equity stock market, in an interview to Moneycontrol. FIIs have net sold nearly Rs 82,000 crore worth of shares since October.
Q: Do you think the momentum is really strong now after recent corrections? Can Nifty50 cross the 18,000 mark in the coming week and why? “Fundamentally” what is the best support level for the Nifty if in case sharp correction begins again?
We do not expect the market to develop a strong positive momentum till the FPIs stop selling. We expect the FPIs to start allocating their 2022 allocations towards the end of the month. Till then we expect the Nifty to be range-bound but at the same time, we expect stock-specific action. At the same time, we do not expect the Nifty to significantly test 16,800 on the lower side.
Q: Economic growth pace has picked up in the last several months now, which is one of the key supportive factors for the market. What could moderate that economic growth pace in 2022?
Barring a sharp resurgence of the virus, we expect the macroeconomic situation to continue to improve. RBI, in its latest policy statement, has kept the inflation and growth figures largely unchanged and promised adequate liquidity to the system.
As the economy continues to open up we expect consumer discretionary demand for real estate, automobiles, home improvement, travel, etc. to pick up significantly and provide more power to the overall economic recovery. Government finances are largely in good shape with better-than-expected indirect and direct tax collection.
Q: Do you think India’s price-to-earnings premium to global equities is already high and hence further P/E expansion may be unlikely?
While the premium is high if one takes into account the near term earnings, it falls sharply when extrapolated for long-term earnings. We do not expect any P/E expansion but we believe that the earnings growth will surprise the upside and provide returns to investors.
Q: What is your broad expectations for the November CPI inflation that will be announced on Monday?
We are not expecting any negative surprises. In fact, with the cooling off of crude and food prices, we expect the CPI inflation to be largely in line with expectations or slightly below.
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Q: Four IPOs – Metro Brands, Medplus Health, Data Patterns, and HP Adhesives – will be opened for subscription next week. What would be your favourite IPO (pick) amongst them and why?
We like Medplus for its scale, store level efficiency, strong operating metrics and very dependable management team. In India, organized pharmacy retail is at a very nascent stage and is expected to show exponential growth. We looked at Data Patterns, but we believe PSU defence companies will always be the first choice for the defence sector.
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Q: Tega Industries, Anand Rathi Wealth, and RateGain Travel Technologies will make their debut on the bourses next week. What could be listing premiums for them and why? What should investors do with these stocks after listing?
These are all interesting companies that will definitely provide returns to short term as well as long term investors. However, investors will need to keep in mind that these are still young companies in competitive industries so they should watch the performance over the next year.
Also read – Tega Industries trades at solid premium in grey market ahead of December 13 listing
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