Nimish Shah, Chief Investment Officer – listed investments at Waterfield Advisors
Nimish Shah, chief investment officer – listed investments, at Waterfield Advisors, says that at current valuations, concerns over the equity markets could derail expected growth. Factors that could hinder growth are inflation and interest rates, he told Moneycontrol in an interview.
Shah, who has close to 25 years of experience in the capital markets across diverse asset classes and platforms, says given the current level of tax collection and the Central government’s fiscal position, no big-bang measures are expected in the Union Budget on February 1. Edited excerpts:
Have you taken advantage of the correction to increase exposure or buy fresh in beaten down sectors? What sectors look attractive?
Also read – Daily Voice | Inflation to be key negative for markets as it’ll harden rates, bring valuations down, says Shailendra Kumar of Narnolia
We have been advising clients to invest on market dips and not be under-invested in the equity markets. Exits from laggards or any profit booking done earlier can be deployed in such corrections.
Select companies in IT, banking, financial services and insurance (BFSI), chemicals, infra ancillaries and auto ancillaries can be looked at during such market corrections.
The Union Budget will be tabled on February 1. Considering the current environment, what are the measures to be taken by the government in the upcoming budget?
Given the current tax collection and fiscal position of the Central government, we do not expect any big bang measures to be announced. Changes in the tax structure have been done and there would not be any scope to further drop taxes.
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The flood of IPOs continued despite the weak listing of Paytm and muted response to Star Health. What are the lessons for companies coming out with IPOs?
The lessons from the IPO markets are more for investors than issuing companies. All kinds of companies would want to list at some point in time and this flurry of IPOs is a good sign of the deepening of the equity markets. Investors need to identify companies where they understand the business and like the valuations at the IPO time.
Listing gains is a short-term view where the gain is limited as allocations in good IPOs are too small to make a meaningful impact on the portfolio. Good IPO stocks should be tracked and when markets give an opportunity, these stocks should be bought into.
What are the key events to watch for in 2022?
Given the current valuations, the concerns for equity markets would be factors that could derail the expected growth. With a 15 percent expected growth in Nifty 50 EPS (earnings per share) for FY23, the concern would be to ensure the economic revival is on line.
The Reserve Bank of India has announced that GDP growth in FY22 is expected to be at 9.5 percent. With the projections they have given for Q1 and Q2FY23, it would be reasonable to expect an around 7 percent GDP growth in FY23.
The factors that could possibly hinder this growth are inflation and interest rates. While for FY22, inflation would remain at around 5.5 percent, if in FY23, it exceeds the RBI’s higher limit of 6 percent, then it could affect growth. Most developed economies are looking at stubborn inflation numbers and are not expecting inflation to be ‘transitionary.’ While most input costs like raw materials, freight and oil have cooled off from their peaks, a resurgence in the prices of metals and commodities could impact demand and growth.
Globally, interest rates are exhibiting an upward pressure and the taper trajectory taken by the US and the EU could well determine the extent of rise in rates. Any sharp upward movement in interest rates in these economies would push up interest rates in most other economies like India. Higher rates will also result in muted flows to global equity markets.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
