Jyoti Vaswani, chief investment officer and head, fund management, Aviva India, tells Priya Kansara Pandya that investors should avoid momentum investing at the current levels. Edited excerpts:
The market seems stuck in a range for the last few sessions despite foreign money flowing in? Do you expect a correction, or there is still some headroom left?
India has received $11.5 billion of net foreign investment in the September quarter, which is highest ever in any single quarter in the history of Indian equity markets. Currently, valuations are neither expensive nor cheap.
Thus, we believe the markets will remain range-bound and consolidate around these levels for some time before they gradually move northwards. Support from corporate earnings and fundamentals is required for an upward rally.
We do not expect a big correction, as Indian equity markets will continue to take cues from the global developments in the near term. The recent monetary policy easing in Japan and another one expected in the US will lead to surplus global liquidity, which will look for attractive destinations like India.
What sectors can surprise positively and negatively in the September quarter?
In the September quarter, we expect cement companies to report a relatively poor set of numbers because of a sharp fall in cement prices across the country. Metals are also likely to show relatively weak results, as realisation have been affected during the quarter.
However, we may see strong numbers from the information technology (IT) companies on the back of strong volume growth and sequential improvement in margins. Overall, we don’t see any significant downgrade in earnings for 2010-11.
Given the current market conditions, what is your advice to investors?
Investors should avoid momentum investing. Don’t get carried away by grapevine and be lured by short-term gains.