Divam Sharma, Founder of Green Portfolio
“We believe interest rate cut should come in Q4 of this calendar year. Even the rate pause or a commentary towards growth concerns from US Fed should be positive for the markets,” Divam Sharma, Founder of Green Portfolio told Moneycontrol in an interview.
He feels the markets are in the last leg of panic.
The key challenges in next financial year will be timelines for change in course of interest rates by US Fed, return of FPI money to Indian markets, and outlook for exports, says Sharma, who has over 13 years of experience in stock market investment management. Edited excerpts:
Do you expect interest rate cut towards end of this calendar year?
We believe interest rate cut should come in Q4 of this calendar year. Even the rate pause or a commentary towards growth concerns from US Fed should be positive for the markets.
We believe that FPI money should flow back to equities, when the rate hikes pause as inflation is still higher than bond yields.
Do you think the current market volatility end in coming months?
We believe that we are in the last leg of volatility as most of the negatives have panned out and we are in the last leg of interest rate hikes.
Geopolitical tensions, if they do not escalate beyond this level and we currently see no signs of its escalation, should not impact volatility.
The key challenges in next financial year will be timelines for change in course of interest rates by US Fed, return of FPI money to Indian markets, and outlook for exports.
We are in the last leg of panic in the markets. We have already seen almost 17 months of subdued broader markets. The market cycles have become shorter now.
What are your thoughts on geopolitical situation and its benefits for India?
Yes, we are just beginning to see trends around this. If you look at India over the last 1 year, we have gained in our relations with large economies and have also concluded several FTA’s.
As we see diversification of manufacturing from China along with the benefits of PLI playing out, we would see a good consistent growth in the GDP over the coming years.
We are seeing many of our portfolio companies in sectors like electronics, telecom equipment’s who are benefitting from China plus one and PLI and are also undergoing significant capex.
What is your view on the auto sector?
Auto sector, overall is witnessing tailwinds and this should continue to pan out as we see better sentiments.
Issues like supply chain, margins, exports will continue for a few months and can impact the stocks. If you look at the long-term outlook, the sector looks positive.
Are you adding positions in banking stocks?
The sector has benefitted from higher credit offtake, better margins and lower NPA’s. We see this trend continuing; however, trend of margin growth should not maintain.
High capex from private as well as public sector will benefit credit offtake. If you look at economic indicators, most of them are pointing towards strong fundamentals and this will help the banking sector which has a high correlation to economy.
Do you think volatility will continue in the IT space?
IT sector has given good results overall. We believe that the sector however should continue to be volatile and subdued for a few more months as the sentiments which supports order book outlook are still not positive.
Large and Mid tier companies have benefitted from vendor consolidation and cost take-out deals while the signs of slowdown specially in Europe are visible.
Do you think the inflation may remain sticky for a longer period?
The core inflation will remain sticky for long. If you look at the Debt/GDP of US, it’s at significant levels. Higher GDP growth is the only viable solution to bring it to sustainable levels and that can only be done through higher inflation driven growth over many years.
We should see times where the interest rate cycles are short. Also, higher rates will start impacting growth and employment and this withdrawal symptom will induce the Federal bank to take action.
Also, we have elections in 2024 and the Government will ensure that the economic growth and employment is not significantly impacted during that period.
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