Vivek Goel of Tailwind Financial Services
“We do believe that monetary policy risk looms and that can continue to keep FII flows volatile in the next few months,” Vivek Goel, joint Managing Director at Tailwind Financial Services, says in an interview with Moneycontrol.
However, “as we get close to Fed policy meets scheduled in May and June, there would be greater clarity on terminal policy rate and that can help revive FII flows in the later part of CY2023,” he added.
Vivek, who works closely with investors in managing their portfolios, believes this can be a good time to add allocation in banking and NBFCs to benefit from any rerating that can happen as market sentiment improves, while the power sector has continued to see healthy demand making it an attractive bet.
Do you expect a strong revival in the primary market in coming months after a subdued equity market environment?
We believe that the market is tracking inflation and its impact on monetary policy closely. The current base assumption is for the tightening to end in the first half of CY2023, if the same happens then FII flows can turn positive to help drive activity in primary markets.
However, we would expect such a revival to be more gradual than a sharp jump as markets and policymakers would be keeping an eye on inflation and growth data.
Will the equity market sentiment remain subdued for a few more weeks? What are the challenges for the market in the rest of the calendar year?
Domestic market sentiments have been negative in the past few weeks and the same can continue in March as well. Latest data from the US on personal consumption expenditure released on Friday overshot expectations and read along with Fed minutes has caused markets to rethink the terminal policy rate and timeline. This will likely play a dampener in March till this month’s data is released to help understand the trend and recalibrate market expectations.
Aside from monetary policy, geopolitical events will be closely tracked with India & US elections scheduled in 2024, along with the G20 presidency adding the focus on India.
Are you super bullish on the banking sector? Are you advising to use the current fall to add long positions?
We have been tracking the financial sector and believe that it is one of those segments where valuations are still below pre-Covid levels. Given the backdrop of strengthening asset quality and expectations of credit growth picking up, this can be a good time to add allocation in banking and NBFCs to benefit from any rerating that can happen as market sentiment improves.
Fed officials remain hawkish, saying interest rate hikes will continue for longer. Do you really feel the Fed can take rates beyond 6 percent in coming policy meetings to control inflation?
While the Fed has been aggressive in its efforts to curb inflation, our base case scenario is the terminal rate being close to 5 percent where the Fed should pause and may remain there for longer. Beyond these levels impact on growth could be adverse, which would then impact the view on a soft landing for the global economy.
Do you think one should start investing in Adani Group stocks now after a severe decline?
No comments
Is the power sector looking attractive for investment?
The power sector has continued to see healthy demand making it an attractive bet. In this segment, utilities which are adding capacity through a combination of renewables and distribution with robust businesses can be considered for medium to long-term allocation in the portfolio.
Do you think the FII flow remains highly volatile in the rest of the calendar year due to Fed risk?
FII flows had improved towards the end of CY2022 before again turning volatile this year. We do believe that monetary policy risk looms and that can continue to keep FII flows volatile in the next few months. However, our base case scenario indicates that as we get close to the Fed policy meets scheduled in May and June, there would be greater clarity on the terminal policy rate and that can help revive FII flows in the later part of CY2023.
Do you expect any kind of slowdown in SIP inflow or DII inflow to equity markets after consistent inflow for the last many quarters?
The resilience shown by retail investors has surprised everyone, who believed that Indian markets are highly impacted by global market uncertainty. DII inflows have been an important support for markets in a volatile environment.
We are not factoring in a near-term impact on the pace of these flows as we believe retail investors have shown a more mature and patient approach over the last year with their investments to be perturbed by short-term volatility in markets.
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