Divam Sharma is the Founder of Green Portfolio
There could be more correction in the equity market if there is a further rally in commodities and anticipation of higher inflation over the coming quarters, according to market expert opinion.
“India has been slightly decoupled from the US markets and it should continue to enjoy that premium. The focus on growth and government support towards incentivizing manufacturing and creating infrastructure will attract foreign inflows and support the markets over the coming quarters,” Divam Sharma, Founder at Green Portfolio tells Moneycontrol.
But Sharma ruled out 15-20 percent correction from here on in coming quarters.
Do you think the RBI has delivered the statement as per your expectations. Is it the right decision given the global central banks hinting faster policy tightening to fight inflation?
This meeting has underlined the focus of RBI on economic progress and manufacturing activity above all else. They do not seem to be worrying about decoupling from the US Fed’s stance.
This is understandable considering the inflation in India is still below the RBI’s 6 percent range and hence they can afford to delay the policy shift. We expect the RBI to follow the global course of rate hikes over the coming meetings but with a slight lag.
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What is your take on the GDP growth estimates of 7.8 percent by RBI against the government’s projected GDP at 9.2 percent?
RBI has factored in some supply-side disruptions and some loss of economic momentum due to the third wave. We also foresee inflation having an impact on household demand over the coming months and hence impacting the GDP growth.
We believe that the bolder stance of RBI on continuing to support growth will provide long-term momentum and investments into India as many large corporates and governments are going into CAPEX mode.
India should continue to be the fastest-growing large economy over FY23.
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Have corporate earnings met your expectations? Do you feel the margin pressure to continue in the March quarter as well?
We see no negative surprises in Q3 earnings. Some consumer-facing sectors are having headwinds on growth volumes.
The pressure on margins is visible and shall continue over the next 2 quarters earnings also as some of the sectors are not able to pass on the rising costs to the consumers.
Capex from corporates and government will have a positive multiplier effect on GDP, enhance consumption and ensure growth over FY23.
Can you name the sectors/themes that one has to add in a portfolio especially after corporate earnings as well as budget, and why?
We continue to believe that the sectors which are witnessing on-ground developments due to PLI (production-linked incentive) and China plus one will be wealth creators over the coming years.
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Pharma, Chemicals, Textiles could be added to the portfolio.
Infra, Steel, Cement, Defence, Renewables should be in focus as we see clear direction towards sustainable Capex-driven growth for the Indian economy in the Budget.
Do you think the current rally in oil prices is a temporary risk for equity markets?
There is anticipation around Brent Crude crossing $ 100 a barrel. We foresee US Fed taking action soon.
There could be some more correction in the equity market if there is a further rally in commodities and anticipation of higher inflation over the coming quarters.
Do you see any major reason that can pull down the market by 15-20 percent in coming quarters?
We do not see a 15-20 percent correction in markets from here in the coming quarters. India has been slightly decoupled from the US markets and it should continue to enjoy that premium. The focus on growth and Government support towards incentivizing manufacturing and creating infrastructure will attract foreign inflows and support the markets over the coming quarters.
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