Puneet Sharma of Whitespace Alpha expects Nifty50 stocks to fetch 12-15% return in long term

Market Outlook

“Aanyone investing in the equity markets should not be swayed by short-term gains or losses. The long-term market returns should make up for the fact that the market has had a poor run in 2022 till now,” Puneet Sharma, President of The Fund and CEO of Whitespace Alpha, says in an interview with Moneycontrol.

He believes that in the long term, the IT sector and Nifty50 stocks, in general, are expected to generate an annualized return between 12 percent to 15 percent.

Let’s start with IT. This has been the biggest loser in this calendar year. Do you think it is time to turn bullish on the space?

The IT sector has taken a beating in the stock market in recent times, there are no two ways about it, with the Nifty IT index down by approximately 25 percent from its peak. However, these companies have significant strengths and that has not changed. Part of the IT sector’s fall is defined by downgrades because of earning shortfalls and FIIs pulling out capital on the back of interest rate hikes in the US and elsewhere.

Anyone looking to invest should consider the long-term prospects of IT or any other sector, while also factoring in the risk of events such as FIIs pulling out capital. In the long term, the IT sector and NIFTY50 stocks, in general, are expected to generate an annualized return between 12 percent to 15 percent.

Have you spotted any investment trends at the FII desk?

FIIs have been net sellers in the Indian market for more than 12 months now, barring short-term counter-trends. However, the market has seen a significant and continuous buying by DIIs in the same period, except in the recent couple of months.

After a solid run in 2021, the current year is very bad for the market in terms of performance. Do you think the trend could get better towards the end of this calendar year and the market can get back to record high levels again by end of FY23?

That is what the market does, it fluctuates and generates trends like the bull run of 2021 and the current poor run. However, anyone investing in the equity markets should not be swayed by short-term gains or losses. The long-term market returns should make up for the fact that the market has had a poor run in 2022 till now.

The consumer durables segment is also caught in the bear trap, falling more than 21 percent in the year so far. Are you a buyer in the space now and if yes then why?

The increasing interest rates are a concern for the sector, putting pressure on sales, but the recent cool-down in commodity prices should help ease some concerns about profitability. Having said that, the long-term view is bullish for the sector and in the short term too, a good monsoon should aid rural demand for the consumer durables.

Where do you see the value among sectors, especially after severe selling pressure?

A lot of the companies which were trading at their all-time high are now trading at P/E (price-to-earnings) levels which have been traditionally considered reasonable or even cheap. But trying to capture value by timing the market is a futile exercise when you consider that the investment horizon for equities must be a minimum of three years. The capital appreciation over the holding period should be far more than the short-term gain on account of bottom fishing.

How can one make the investment game strong in an inflationary and recession environment?

The ideal thing to do, and the hard part of investing, is to hold your nerves when the markets are going down. Equity investments should be done with the objective of generating long-term wealth, and not reacting to short-term inflationary/recessionary trends. These trends should not materially change one’s investment philosophy. As Warren Buffett famously said, it is wise for investors to be fearful when others are greedy, and greedy when others are fearful.

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