“We believe that unless the market sees a steep correction further, the faith of retail investors will remain and domestic flows will continue,” Ashutosh Tiwari, Managing Director – Research, at Equirus, told Moneycontrol in an interview.
Retail has made good money in equity markets over the last two years, especially when other investment options like debt and gold have not generated good returns.
On the market correcting sharply, “while one can’t rule out a small correction further, we believe that the possibility of a bounce-back is high,” Tiwari said.
Edited excerpts:
The market fell more than 10 percent in the last one month and in fact, has consistently been in a downtrend barring intermittent buying. Do you think the correction is yet to be over considering the current macro environment? Do you expect another 5-10 percent correction?
Rising global yields to counter inflation and a surprise hike by the RBI spooked markets, but we have seen quite a sharp correction in the last one month, more so in the Small and Mid Cap space.
While one can’t rule out a small correction further, we believe that the possibility of a bounce-back is high. Domestic growth is reviving as the rural economy, which was a pain point, has started recovering over the last 1-2 months.
So far domestic investors have managed to offset the impact of FII outflows to a major extent. Is there any possibility of the domestic flow slowing down if volatility persists in the market for a longer time?
Retail has made good money in equity markets over the last two years, especially when other investment options like debt and gold have not generated good returns. We believe that unless the market sees a steep correction further, the faith of retail investors will remain and domestic flows will continue.
The Bank of England has already hinted at fears of a recession and inflation above 10 percent. What are your thoughts and do you really expect a recession kind of environment in Europe?
Europe is one of the most impacted by the Russia-Ukraine war and has witnessed a sharp increase in energy and food prices, which can slow down growth. However due to supply issues, there is still pent-up demand in many product categories and hence a recession may not hit immediately. If high inflation persists then a recession is a possibility.
As there is relentless selling pressure, what are those pockets that are looking attractive now?
Auto is definitely looking good for a 2-3 year perspective as after three years of decline, we expect volumes to see a cyclical recovery. Rural demand, which was the main pain point earlier, has started improving from April. We also find the capital goods and industrial sectors attractive.
The major driver for this market fall is the IT space, which corrected around 16 percent in the last one month. Is it time to go overboard on this space or should one wait given the current global macro environment?
One can play selectively in IT post correction as a rupee depreciation will benefit it. Companies having lower exposure to Europe will be the preferred play as the Euro has depreciated.
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