Amit Jain is the chief strategist of Ashika Group and co-founder of Ashika Wealth Advisory
“COVID may be a risk as cases are increasing not only in China but also other parts of the world but to me the bigger threat for the global market may be a possible World War III, which we already shared with media on July 12, 2020, and now looks a reality,” Amit Jain, Chief Strategist – Global Asset Class at Ashika Group, said in an interview to Moneycontrol.
India is trading at a forward price to earnings of 22 while other European and Asian markets are trading at a forward P/E of 10 to 13, which shows India is almost at 70 percent premium, he added.
“As of now India and the US are the most expensive markets worldwide in terms of valuation. We cannot rule out further correction in Indian and US markets, as we believe this gap will narrow down by the end of calendar year 2022,” Jain said.
Edited excerpts:
Finally LIC IPO is going to be launched next week. Lots of ifs and buts about IPO including its price band and size before launch. Your thoughts….
In my view, this is a must subscribe IPO for retail investors as they are getting it at discount. Also with revised IPO size and overall valuations, we expect good returns for retail Investors on listing day.
China is facing lockdown fears now due to rising virus cases. Do you think the virus is still going to be a risk for the equity market?
Yes, there may be a risk as virus cases are increasing not only in China but also other parts of the world. However, this fourth wave may not be as fatal as earlier waves. To me the bigger threat for the global market may be possible World War III, which we already shared with media on July 12, 2020, and now looks a reality.
If we all believe that the virus is man made, then I am sure the ulterior motives of powerful economies will come out soon in public domain. If we have World War III or Trade War II, then there could be only one inherent reason and that is increasing global debt which is now close to $ 303 trillion, or we can say that total debt of the world is almost 300 percent of world GDP.
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Do you think FII money will keep going out of commodity consumers like India to developed countries?
If you closely observe FIIs have been continuously selling since 2015 except in 2019 and 2020. Now their cumulative holding in the Indian market is lowest that is close to 17-18 percent.
But for last seven years we believe our retail and mutual fund money is “new FII” for equity markets. Only our domestic institutions, HNIs and retail investors are saving Indian markets from crash.
In my personal view, with increasing interest rate scenario, this trend of FII outflow to US, may continue in short to medium term.
US Fed chair already indicated 50 basis point rate hike in May’s policy meeting. Do you expect the Fed to hike rates by 50 bps each in upcoming policy meetings to tame inflation?
Yes, 50 bps for May 4’s Fed meeting is almost confirmed. If it does not happen, then we may see short term rally in global markets. However, I expect at least 1.75 percent increase in interest rate by Fed across 2022.
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Do you think India is trading at a significant premium to its peers? Also considering macro issues, do you expect any kind of major price correction in coming days?
Yes, this is true that India is trading at a forward P/E of 22 while other European and Asian markets are trading at a forward P/E of 10 to 13, which shows India is almost at a 70 percent premium.
As of now India and the US are the most expensive markets worldwide in terms of valuation. We cannot rule out further correction in Indian and US markets, as we believe this gap will narrow down by the end of 2022.
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Do you think the commodities cycle especially the metal space is close to peaking now?
In my view, commodity cycle is in the last leg of its bull run, but this view may change if we have actual World War III.
Given several issues globally, what do you want to pick for your portfolio at this point in time?
In our September 2021 interview with Moneycontrol, we shared our bullish view on auto and since then the sector is up 10 percent, compared to Nifty which is down by one percent. Hence, we can say we have generated an alpha of 11 percent for investors, who followed our strategy. As of now we feel the same value lies in pharma and FMCG.
How do you read the corporate earnings announced so far? Do you expect significant earnings downgrades in coming quarters due to global issues?
Till now most corporate earnings are below expectations and in our view this trend may continue till September 2022. We may see some downgrades in selected sectors like IT, manufacturing and energy.
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