Divam Sharma, Founder at Green Portfolio says they believe that a correction to the tune of 5-15 percent in the Nifty cannot be ruled out. “Considering the developments, investors should not be leveraged while investing in equities.”
The shift in policy of RBI from an accommodative stance will result in a correction in the markets and can also impact the inflows of retail investors in the market, says Divam who has over 15 years of experience in investment management.
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?
We think liquidity has been one of the key supportive factors for the market and the same could also dent the pace of growth in 2022.
There is a dry up in the liquidity from foreign institutional investors to the emerging markets including India. The shift in policy of RBI from an accommodative stance will result in a correction in the markets and can also impact the inflows of retail investors in the market.
Investors should now look at the cushion in valuations and impact on businesses due to the rise in inflation and interest rates while investing in equities.
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 believe that a correction to the tune of 5-15 percent in the Nifty cannot be ruled out. Considering the developments, investors should not be leveraged while investing in equities.
However, considering the prospects of India over this decade with the developments like production linked incentive (PLI), capex being planned, rising exports, these short-term corrections should be considered as an opportunity to gradually increase allocations at better valuations.
Do you think India’s price-to-earnings premium to global equities is already high and hence further P/E expansion may be unlikely?
With the interest rate increase on cards, we expect that the P/E (price-to-earnings) multiple expansions should come to a halt for now.
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There could be short-term pressure on the markets with the Omnicron scare, rising inflation, dollar appreciation, rising interest rates. However, it will be interesting to see how the companies are able to show growth in numbers without much impact on the margins.
What is your broad expectations for the November CPI inflation that will be announced on Monday?
CPI retail inflation numbers in November are expected to be above 5 percent.
Prices of Brent crude were at their peak in November. In the US, the CPI is expected to surpass the numbers seen in 4 decades. This high level of inflation can result in an earlier-than-expected rise in interest rates and can result in a 5-15 percent correction in equities.
We have already seen emerging economies including Brazil raising interest rates by 150bps earlier this week.
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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?
The pricing of these upcoming IPOs has been done on the aggressive side. It will be difficult for these companies to sustain these aggressive valuations as there are incumbent businesses available at more reasonable valuations.
We like Data Patterns out of the lot. There can be a 30-50 percent listing gains for Data Patterns being a niche player in the Defence and Aerospace electronics solutions having an innovative business model, sound order book and profitable track record.
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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?
Tega Industries can list at a premium of 30-50 percent to the IPO price band. At PE multiples of upwards of 50 times, allottees should look at booking their profits as, despite the growth in business, the company seems to be priced on the higher end.
Also read – Tega Industries trades at solid premium in grey market ahead of December 13 listing
Anand Rathi Wealth can list at flat to 10 percent listing gains. Short term investors can consider an exit at these levels while long term investors can continue holding the company as the future potential growth in the business looks promising.
Rategain can list at a flat to 10 percent listing gains. Long term investors can consider holding the stock as the company can benefit as we see the opening up of the economy and travel sector. Short term, Omicron scare will have a tab on the share price.
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