The market faces domestic and global headwinds in the near term, says Prasun Gajri, CIO of HDFC Standard Life Insurance. But Gajri?s long term perspective remains bullish. In an interview with Ashley Coutinho, he says that in the next few months there is likely to be a greater focus on earnings and any further upward move will be justified only by the earnings growth.
How do you see the Indian equities performing during the rest of the fiscal year?
We continue to be bullish on the markets from a medium-to long-term perspective. We remain cautious for the short-term though. There are a number of headwinds the market faces both on the domestic front and from the global macro situation. While we see a greater focus coming back on earnings, liquidity flows will continue to be a key driver for the market in the near term.
How will the recent series of scams affect market sentiments?
Any kind of corporate scam does have an impact on the market confidence and turns the sentiment negative. Our feeling is that the impact from the news so far is already in the price and the market will not be too concerned if nothing more significant emerges from the investigations.
What are the headwinds that you foresee for the market?
The near-term headwinds are large paper supply, tight domestic liquidity, likelihood of earnings downgrade and the global macro situation. This makes us cautious over the next few months. We are much more confident over the medium to longer term. While the fiscal deficit, inadequate supply side responses and lack of infrastructure development are the headwinds, we believe that the corporate earnings will grow at a healthy rate despite these headwinds. This makes us confident that the Indian equity markets remain an attractive investment opportunity for the more disciplined and long-term investor.
At present, is the market driven more by liquidity?
At current levels, we believe that the fundamentals are factored in and that the market is fully valued. While liquidity has been a key driver for the upward move, the earnings also have by and large met expectations so far. We now believe that there is likely to be a greater focus on earnings in the next few months and any further upward move will be justified only by the earnings growth going forward.
Which sectors are you betting on?
We have been and continue to be bullish on the domestic consumption and investment themes. We are not keen on adding exposure to sectors which are linked to the global economic growth. We remain overweight on consumer goods, pharma, capital goods. We believe that these sectors have a lot of drivers and can exhibit superior earnings growth over the next few years. Structurally, we are also bullish on the financial services space but are cautious on account of the current liquidity situation. We are underweight on commodities and telecom.