If Covid-19 impact is minimal and does not deteriorate from what we see today, we could have a potential to move towards mean valuations – that will imply a return of up to 17% from here.
Even as the valuations have slipped below averages, investors are still apprehensive of the impact of Covid-19 on businesses and, more importantly, the sentiment, says Amit Khurana, head of equities at Dolat Capital. In an interview with Yoosef KP, he says that if the virus impact is minimal and the situation doesn’t deteriorate further from what we see today, the Nifty50 could gain up to 17% from here. Excerpts:
The benchmark indices have lost about 30% this year, how far this slide will continue or we have already bottomed out?
Temporary bottom seems to be in place at 7500 Nifty level. We may well be in the midst of a pullback sharp rally now. And a band to be set up for medium term. Further moves will be driven by news in India cases and if lockdown opens up or gets extended.
Do you think the measures announced by the Centre and RBI are good enough to combat the virus issue?
Yes. RBI has been very aggressive in dealing with its steps. It has ticked off all boxes to convey to the markets that it is control and will take whatever steps are necessary. That messaging is very critical at this stage and it seems to have conveyed it.
While the broader market has fared very badly in the sell-off, the top 10 stocks are still holding up the benchmarks. Is it because the investors opt for safety or they really worth such valuations?
Yes. It’s fairly evident in select pockets. Consumer staples have been a clear example of that. But banks have not been as active though.
How the lockdown will influence the primary market issuance and how long will it take to revive?
Significantly negative. Will take a good time – may be couple of quarters at least.
We saw some kind of broader rally emerging in the beginning of this year. Do you think that will come back once the virus issue dies down?
Yes. But we will have to take it one day at a time. Valuations have turned below averages but investors are still apprehensive of the impact on businesses and, more importantly, the sentiment.
What would you like to buy in this market, do you prefer any particular sector or you look at dividend yield of individual stocks?
Stock specific approach – telecom/ specialty chemicals/ private banks/ staples. Avoiding discretionary spending names like durables, real estate, hotels, autos.
What would be the return from equities for the year 2020 and where Indian’s valuation will stand by the end of the year?
Too much of fluidity in current situation. If Covid-19 impact is minimal and does not deteriorate from what we see today, we could have a potential to move towards mean valuations – that will imply a return of up to 17% from here.