Santosh Kumar Singh
Santosh Kumar Singh, who heads the research wing at Motilal Oswal AMC, believes that the markets will scale higher levels in the next six months if the Ukraine-Russia conflict doesn’t turn into a full-blown European war.
In an interaction with Moneycontrol, the dynamic financial analyst says that unless the commodity prices play a spoilsport, the market seems to be quite attractive at a fundamental level.
On the earnings estimates after spike in commodity prices, Singh says the downward revision in earnings would be more in the sectors then for the Nifty as whole as commodity producers would compensate for the margin hit in the commodity consumers. Excerpts from the discussion with Singh:
The market cap-to-GDP ratio, or the so-called Buffett Indicator, is at a record high of 110 percent since 2007. Do you think we are still trading at high valuations?
While looking at the market cap-to-GDP ratio, one needs to be aware of the fact that from 2007 there have been many new listings in sectors which were not there. Unless commodity prices play a huge spoilsport, the market seems to be quite attractive at a fundamental level.
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Given the current market dynamics, do you think we are near the bottoming process?
Given the war situation, calling a bottom on the market may be very difficult. However, assuming this doesn’t becomes a full-fledged European war, we are expecting the markets to be at a much higher levels in the next six months.
Near-term rise in commodity price may be another factor which may keep the markets jittery, however, we expect most of it to settle down in a year’s time.
So far this year, 49 firms have received the Sebi approval for listing. Do you think the current geopolitical tension will delay the IPOs by more than a month or so? Or, is it that these companies are waiting for the mother-of-all public issue from LIC?
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We are not very sure, to be true, if so many IPOs can go through. It’s not only due to geopolitical reasons as most of these IPOs fell significantly before that itself. It has been the greed to extract highest valuations from the market which may keep the investors jittery for some time. Even if the IPOs happen, the valuations may not be as high as they were before December.
Most of sectors as well as stocks are trading way below their highs. Where do you want to put your money?
Some of the sectors which have lost the most despite having very good fundamentals and economic tailwind are financial services, real estate and some of the capital goods stocks. We would like to put some money in this space.
Are you revising your earnings estimates downwards for FY22 as well as FY23, especially after the commodity price rally?
There could be some impact to earnings estimates, however, the downward revision would be more in the sectors then for the Nifty as the commodity producers would compensate for the margin hit.
Why are the Indian markets not seeing major correction yet, even as there is a 85 percent rally in oil prices in just two-and-a-half months and relentless selling by FIIs since October?
The major contributors to this have been the DIIs. We have seen DIIs remaining rocksolid during these uncertain times as the India story remains intact and the global events are causing temporary dislocations.
Is it the time to go overboard on auto space that has lost 16 percent since January’s high?
In my view, one can start buying in passenger vehicle and commercial vehicle, however, I would remain sceptical of two-wheelers as in that part of the business some of the issues are not transitory like rural stress and electric vehicle transition.
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