The Indian equity benchmarks closed at a 13-month high on a stronger rupee and lower than expected US inflation data raising hopes of easing of rate hikes by the Federal Reserve.
The 30-pack Sensex ended 1,181.34 points, or 1.95 percent, higher at 61,795.04, while the broader Nifty gained 321.50 points, or 1.78 percent, to 18,349.70.
Earlier in the day, Nilesh Shah, founder and CEO of Envision Capital, shared his views on the market trends in an interaction with CNBC-TV18. Edited excerpts:
India finds itself at near highs with this move in the market but not so much for the US market, which is a massive move to take place overnight. What are your views?
The rebound in the US market is a great development. India has been a stark outperformer in terms of what has been happening globally. This provides a tailwind for India to physically break out and reach new highs, which is beneficial for Indian equities.
October’s systematic investment plan (SIP) inflows hit a monthly record high. Assuming there’s a big move coming, what are the spaces you would look at as an investor?
It seems like the next few months are going to be quite strong. Early January is going to witness a fresh round of allocations for the new calendar year. Indian bonds are expected to be a part of the global indices as well.
In the first quarter itself, the government is aiming for privatisation of IDBI Bank, as per media reports. Overall, I feel like this is a great time during which priming the market is a sensible idea in such an environment amidst such high outperformance. Additionally, corporate earnings have been quite strong too. Under such conditions, it is only sensible to keep allocating, given the liquidity.
Going forward, I feel that even in India, inflation is going to taper off and rate hikes are expected to be modest.
We are halfway through the year, and this was supposed to be a good year given that the earnings last year were low. Do you see a risk to the earnings estimates and what would you say about the past earnings?
This earnings season has been quite a mix. The financial sector has reported some strong numbers but the manufacturing sector, like pharmaceuticals, chemicals and more have undergone some margin pressure and the volume of tech has not been very great. But I feel that all of this is likely to ease, with inflationary pressures starting to abate… The focus of the investors is going to be towards FY24 which should be better than what FY23 has been.
While there has been a 200-point rally in the Nifty with multiple stocks hitting highs, autos have been a little bit patchy. The commercial vehicles segment has done well but that can’t be said of two-wheelers. What are your thoughts on these?
The auto components sector is going to outperform the broad auto pack because there is going to be variation in performances in the latter. But relatively, auto components look like a much better space. Demand is up with good revenue growth being reported. Technology services have surprisingly been steady in terms of growth. Margins seem to be tapering off a bit but they’re strong, nevertheless. On the basis of this, I expect tech to shed its underperformance. Second is defence and third is auto components. These three look quite compelling pockets in the market.
Today, tech is one of the big gainers and you have the metal index as well which will do well, due to the softening of the dollar index, though there are plenty of headwinds. Would you use them to step out of commodity-related stocks?
I feel that commodities have peaked and sure, they have bounced back from the middle of the year, but we should use these opportunities to exit. These are not investment candidates and, therefore, should not be part of a portfolio. There is also some softness in terms of the dollar index but on the whole I do not think that there is a great environment for metals and other commodities going forward.
