Harshad Chetanwala, Co-founder of MyWealthGrowth.com has ruled out the possibility of massive earnings downgrade at the broader level, though there is the worry of rising inflation.
“The challenges of high input costs, oil prices and inflation could continue to affect sectors like infra, metals and FMCG where the downgrades could be more. At the same time, banking, financial services, and IT, along with oil & gas may not see huge downgrades. Overall, we do not see a massive earnings downgrade at the broader level,” he explained.
In an interview to Moneycontrol, he said the market volatility could continue as interest rate hikes are yet to kick in. From an investment perspective, the volatility could provide a good opportunity to invest systematically, he feels.
At present, it is better not to rush in and invest at one go, at least for the coming three to six months, he advised.
Is there any possibility of stagflation in India?
Leaving aside high inflation, we believe that the economy would continue to revive in the coming days, while at the same time the unemployment rate could improve. The unemployment rate improved in March and continues to do better so far in April. The economic revival is moving in the right direction and hence, at present stagflation is not something that should bother equity investors much, in our view.
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The markets have been range-bound so far this calendar year. Your thoughts…
The markets could continue to remain volatile in the coming few months due to all these factors which are not just faced by India but also by the entire world. Many developed countries are facing high inflation, which they have not seen in recent times. Multiple factors like excess liquidity across the world followed by the Ukraine-Russia crisis resulted in higher crude prices and inflation.
The market volatility could continue as we are yet to see the interest rate increases. As we are aware that this will happen gradually, a sharp fall in the market may not happen, despite all these factors. From an investment perspective, the volatility could give a good opportunity to invest systematically. At present, it is better not to rush in and invest at one go, at least for the coming three to six months.
Given the higher inflation and the higher interest rate environment going forward, do you think there could be large earnings downgrade in the coming period?
The challenges of high input costs, oil prices and inflation could continue to affect sectors like infra, metals and FMCG where the downgrades could be more. At the same time, banking, financial services, and IT, along with oil & gas may not see huge downgrades. Overall, we do not see a massive earnings downgrade at the broader level.
What are the key themes that you are backing right now?
Banking & financial services and consumer discretionary are the two sectors one can consider at present in our view. The BFSI sector could continue to recover well after the correction we saw in the previous quarter. Consumer discretionary could grow better. We believe, demand is picking up further and despite high inflation, companies would be able to pass on the costs to the end consumer.
From a theme perspective, cyclical and inflation-proof are the ones that one can consider at this stage.
How do you read the IT space that has been badly affected post Infosys’ quarterly earnings? Is it the time to bet on IT?
The IT sector is going through a phase of high attrition, along with high salary costs. At the same time, the IT sector in the prominent markets has passed through difficult times recently. Due to all these factors, we could see some more impact in the near future for the Indian IT sector as well.
However, from a long-term perspective, we remain bullish on this sector and it has all the potential to deliver returns to its investors. But at present, it could be better to go slow and gradual in adding IT to the portfolio.
Are you picking any new-age tech companies listed in 2021?
Most of these companies have seen massive correction in prices. However, considering the overall factors some of them continue to remain expensive at present. Some of these companies do offer solutions for unmet demand and continue to remain market leaders in their segment. But there is still some time for their business models become robust and valuations turn attractive.
One should have a minimum three- to five-year view in mind at the time of considering these companies.
The green infrastructure theme is at a nascent stage. Is it time to take exposure to these companies?
Sustainable investing is becoming a part of the overall portfolio and one can look at gradually adding these companies to the portfolio. Over a period, sustainability as a theme could see more participation from well-established companies, both existing as well as new-age. Evaluating these companies from a valuation and opportunity perspective and not just the kind of returns they have generated over the last one year is an important factor.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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