Sandeep Nanda, chief investment officer, Bharti AXA Life Insurance, tells Priya Kansara Pandya that the central bank’s reaction to the gush in foreign inflows and rising rupee will guide equity markets in the medium term. Edited excerpts:
Do you expect the markets to correct, or will they rise further? What will be the triggers for both?
The markets are not cheap at the current levels, but flows are strong and are likely to continue in the run-up to quantitative easing expectations in November. The macro trigger arises from the Reserve Bank of India’s reaction to the appreciation in rupee and gush of foreign inflows, while micro triggers will be the earnings season.
The midcaps and smallcaps have lagged behind the Sensex for the past three months, but are now trying to outperform. Are you selectively looking at such stocks, or you still find value in select largecaps?
The large-cap index stocks have done well, as they are the initial beneficiaries of strong foreign inflows. Midcaps tend to catch up with a lag. We continue to invest in midcaps where growth and valuation parameters compare favourably. The proportion of midcap investment, however, depends on the asset allocation mandates of specific funds.
Which sectors, according to you, can surprise in the September quarter results?
Autos, financials, capital goods equipment, metals and IT sectors are expected to show strong growth. On the other hand, cement and construction have been affected by the monsoon, while consumer and telecom sectors were dragged by competition.
Are you worried about the rising crude and metal prices?
The weakness in the dollar due to expectation of quantitative easing is leading to an increase in the dollar-denominated prices of commodities.
While this may pose a challenge for India’s current account, given our dependence primarily on oil imports, factors like no underlying improvement in demand and enough liquidity mitigate this risk.
