It looks only inflation, but further continuation of supply-side constraints will certainly create a much higher possibility of a stagflation for the Indian economy, warns Amit Jain, Chief Strategist for Global Asset Class at Ashika Group.
Most of IT stocks are down from -20 percent to -50 percent since their 52-week high. He believes it is excellent opportunity to build long term IT portfolio at reasonable price. Investors may invest 70 percent of their IT sector allocated amount at current levels & rest can be deployed through weekly STP route, the expert said.
How do you protect your portfolio if there is any kind of stagflation or recession kind of environment appearing? What are the pockets to look at to strengthen portfolio?
Yes, there are higher chances that we may see stagflation even in India if this Russia-Ukraine war continues for some more time. As of now, it looks only inflation, however continuity of supply side constraints will certainly create a much higher possibility of “ Stagflation” for Indian Economy.
However, as an exception India’s growth shall be highest in the World for FY 2022-23 with moderate inflation, which may sustain for one more quarter.
Long term investors may invest in selected stocks of IT, Pharma & media sector to avert this stagflation cycle.
Despite heavy selling by FIIs since last October, the price correction is minimum. What is the reason behind minimum price correction in same period?
Since my last interview with Moneycontrol for the exit point on August 20, 2021, FIIs have sold Rs 3,37,000 crore worth equities in Indian Markets. We warned about this bubble in most of the Global Asset class in our exclusive interview with Moneycontrol. Most of mid-cap and small-cap stocks are down from -20 percent to -60 percent since our exit point interview. However, Nifty is still down only -13 percent from its peak and the reason is inflow of domestic retail and HNI money, which has saved our market from major crash.
If this level of FII selling could have been in year 2008, then market must have crashed by 50 percent to 60 percent, as in those days domestic Investors used to invest most of their money in Real Estate & Gold, but post demonetisation & Covid-19, there is a structural shift in domestic investors’ portfolio from all other asset class to equities. This has helped NIFTY to put strong resilience on downside even after such ferocious selling by FII’s since August 2021.
After seeing the biggest correction among sectors this year, do you think IT space is looking attractive now considering the current macro environment?
Yes, you are right, most of IT sectors stocks are down from -20 percent to -50 percent since their 52-week high. In my personal view, it is excellent opportunity to build long term IT portfolio at reasonable price. Investors may invest 70 percent of their IT sector allocated amount at current levels & rest can be deployed through weekly STP route.
What is the message from the monetary policy of RBI?
RBI will raise rate of interest by another 1 percent in this ongoing FY 2022-23. Globally inflation is emerging as the biggest threat for global growth. Inflation in US almost at 40 years high, even in Europe now it is becoming alarming due to energy crisis.
In my view, Global central banks including RBI has very limited options, except continuous periodic increase of rate of interest, till we control inflation below 6 percent.
After Q4 earnings, do you think India is at the beginning of earnings downgrade cycle?
There may be earning downgrade cycle for some of the sectors post Q4 numbers, however on broader terms I see limited downside at least on earning fronts. In my view IT, Pharma, FMCG & Banks are good bet at current valuation.
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