Divam Sharma is the Founder of Green Portfolio
Green Portfolio’s Divam Sharma, who has a positive view on the markets for the rest of the financial year, believes that India should attract a higher FPI allocation among the developing market peers considering its tailwinds and should outperform in this rally.
Even after significant correction from the highs, the Co-Founder of Green Portfolio with more than 13 years of experience in investment management in stock markets, sees comfort in valuations of some of the mid cap IT companies. Overall, he believes that the IT sector should have a more wait and watch approach.
About gold, the major underperformer, Divam believes that the yellow metal can outperform as an asset class going forward. “With countries targeting to strengthen their home currency and do trades in their home currency, and with digitization of currencies, the demand for gold should increase going forward.” Edited excerpts:
Do you think the value is emerging rapidly in the IT space? What are your thoughts on the IT earnings announced so far?
We are positively surprised by the results and commentaries so far. However, buybacks reflect a lot of conviction from the management, we believe that the sector should instead have a more wait and watch approach.
We are beginning to see comfort in valuations of some of the mid cap IT companies.
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Do you think the fall in global tech budgets & further fall in margins are two major worries for IT sector?
Yes, we see IT sector facing issues in coming quarters in getting large orders as developed nations announce recession. However, the problems of attrition and rise in employee costs should settle for now.
With the PE money getting tough, there will also be an impact on the IT spends from many large start-ups.
Will the expected US recession be positive for India?
We believe that with the continuation of war between Russia and Ukraine, trade war between US and China and with other geo political issues, we are going to see massive realignment in global trades.
We see a high possibility of recession in US in the coming calendar year.
With high interest rates in US and the reducing gap in interest rate differential between India and US, the currency depreciation that India has faced for decades versus the dollar should stop or even reverse.
The world will be spending on re-globalization and doing capital expenditure for diversifying their manufacturing needs. The world has already seen how concentration risk with Russia has severely impacted many European nations, pushing them into an energy crisis. Also, there is a clear concentration risk with China in manufacturing.
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India has a head start with very effective Government policies towards setting up the required infrastructure, and policies to support its claim. We also have a very favourable demographics to support this. This will also attract a lot of FDI for India in the coming years. So yes, India will definitely benefit from a recession in US.
Do you think the June lows are unlikely to be met by the market again during rest of financial year?
We have a positive outlook on the markets for the rest of the financial year. In the last 1 month, many shorts have been built and these positions had generated profits for traders.
Considering most of the worse news has already been taken into consideration by the markets, we should be seeing some covering of short positions.
US market valuations are at their historical lows and considering upcoming mid-term elections, and a higher probability of Republicans winning, the markets should react positively.
We believe that India should attract a higher FPI allocation among the developing market peers considering its tailwinds and India should outperform in this rally.
Do you expect higher interest rate scenario to remain till the end of 2023 or will it be reversed in second half of 2023 ahead of general elections?
This time, the inflation is driven by macro factors like war, supply chain issues and is impacting developed economies which usually used to remain isolated from such high inflation rates for decades.
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Elections will not have an impact on inflation. We are moving towards an era where the trades will happen with preferred nations and the supply chains will get redefined. We have to look at global factors which are currently unpredictable.
Do you see gold prices falling more from here given the strong US dollar and rising fears of aggressive policy tightening in upcoming meetings?
We believe that gold can outperform as an asset class going forward. If you look at Gold, it is only asset which has underperformed. We are going to see higher sovereign allocations towards gold. With countries targeting to strengthen their home currency and do trades in their home currency, and with digitization of currencies, the demand for gold should increase going forward.
Also, soon the world will realise that the inflation is here to stay for a long term and countries like US will increase their long-term inflation targets, which will have a positive impact on gold.
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