With the rising risk of geo-political tensions amid the ongoing Russia Ukraine war, Raamdeo Agrawal, the Co-founder and Joint Managing Director of Motilal Oswal Financial Services, shared his views on market outlook in a conversation with CNBC-TV-18.
He said that risk is always invisible, which we are not aware of.
“One risk may be over but there might be something else that might be brewing somewhere so we need to be always prepared for any kind of risk”, he said.
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Agrawal said that “It is very tough to figure out the damage done. As the time comes by, we will realise that the weaker industries have become weaker, and weaker companies in those weaker industries have become worst, and the stronger industries will emerge stronger out of this crisis again. And among those strong industries, stronger companies will emerge even strongest.”
While foreign institutional investors (FIIs) have recently been continuing to exit the domestic market, Agrawal said that they will have a painful entry once they intend to come back.
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“What is happening in the stock market front – that is more than a billion dollar daily selling by FIIs. That is a real world for us. We have to face that every day. I think we have faced that brilliantly. So they have had a wonderful exit from India but they will have very painful entry if at all they want to enter,” he said.
Agrawal further added that it is important to be now prepared for times of peace after the war, as lot of sectors have suffered and will continue to face hardships due to the lingering effect of the war and sanctions.
The current scenario is risky for both the markets as well as retail investors as lot of first-time investors had joined the markets in the past couple of years.
“Yes it is a risk to a large extent because you can push the retail investors upto a certain extent, but once they break down, everyone will break down together,” he said.
“The fixed income returns are not going to rise in the near term so there is no alternate asset class to shift from equities,” Agrawal said.
“Retail investors might step back and watch from the sidelines till the markets stabilize and once the prices start moving up they will come back with double the vigor.”
Agrawal said that a bottoms up approach is the right strategy in the current market conditions.
He also said that manufacturing will be impacted the most as all the commodities which have witnessed run-up in their prices will affect the economics of the manufacturing sector/companies.
When asked if commodities price will remain higher for much longer, to which he said, “It is very difficult to figure out the damage done but there are high chances that the weaker industries during the current crisis have become weaker and the weaker companies within these weak industries will become worst. The stronger industries will emerge stronger out of this crisis again and among those those strong industries stronger companies will emerge even strongest.
Agrawal also said that service industry will do better than the manufacturing because all the raw materials go into manufacturing. A company wise assessment in manufacturing will understand who’s hit and how much. He further said that service industries like IT, Banking, insurance, broking are broadly not impacted by the current crisis to a large extent.
“Banks, broking and insurance companies are getting impacted by the MTM (mark to market) losses but their fundamentals are still strong”, Agrawal said.