'Equity investors should pare return expectations'

Q: Do you think that the global financial markets, including India, have overreacted to the likelihood of the US Fed's rate hike and the geopolitical situation with Ukraine?
Ans: 
>Markets tend to overreact on both sides – to the good as well as bad news
>US Fed rate hike impacts global flows, especially the emerging markets
>Ukraine issue is like going back to the ‘cold war’ days
>Markets dealing with too many headwinds and are nervous 
>Seeing a healthy correction after a secular rally since March 2020
 
Q: Do you see more correction or are we close to bottoming out?
Ans: 
>FII selling is being balanced by domestic institutions buying
>Key positives: Good budget, Capex spend
>Markets yet to digest higher inflation possibility
>Rally will resume once there is clarity on earnings impact
>Market outlook: Subdued in the short-term; will pick up post Q1FY23 numbers of India Inc.
 
Q: Where do you see leadership emerge if the markets are to sustain and even move up from the current levels?
Ans: 
>Information technology
>Banking & financial services (BFSI)
>Capex-related plays
 
Q: Are the sore points?
Ans: 
>FMCG valuations are high; likely to underperform
 
Q: How big a dent can rising fuel prices and inflation cause in fiscal 2022-23 (FY23) earnings of India Inc? 
Ans: 
>Auto fuel prices have been constant due to impending state elections
 
Q: How do you think are the retail investors looking at these developments? Are they cautious now before putting in their money?
>Retail investors have matured; investing via mutual funds (SIPs)
 
Q: What has been your investment strategy?
Ans: 
>Suggest looking at shorter-end of the cycle; fixed tenure products
>Equity investors should pare return expectations, but remain invested
 
Q: Your portfolio strategy?
Ans: 
>Investors should not stay in cash
>Not too much overweight on equities now
>Investors should wait for better opportunities to enter the market
 
Q: Do you think the LIC IPO can be a threat to the secondary market liquidity?
Ans: 
>Markets will be able to absorb the IPO
>Liquidity will get back to normal in a month’s time post the IPO
 
Q: A number of new-age companies that listed recently have seen their stock price crash in the recent market correction. Have the retail investors learnt a lesson that they need to look at the fundamentals of the company, earnings outlook and not to invest purely based on the hype surrounding the IPO?
Ans:
>Investors got caught on the wrong foot seeing the listing gains for some issues
>Investors a disappointed lot now
>Fintech valuations have shrunk in India and globally
>Investing in these stocks is not advisable at the current levels

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