Sidana advises investors to keep a bottom-up approach and invest into the businesses which are likely to regain demand once the situation normalises.
After having suffered a 1,000 point loss on Tuesday, the S&P BSE Sensex is up by over 700 points today, highlighting how volatile the equity markets have become. The volatility seen in the stock markets is just one aspect of how things have changed since the novel coronavirus spread across the globe. In the post-coronavirus world, businesses will undergo a transition and the biggest gainer could be the IT industry, Gurpreet Sidana, Chief Operating Officer, Religare Broking Ltd told Kshitij Bhargava of Financial Express Online. Sidana expects the volatility to remain high but has a word of advice on how to trade during such times. Here are edited excerpts of the interview:
- Across the globe, markets have recouped, but largely there is a consensus that the equity markets in India will remain volatile for a while now. Amidst such volatility what advice would you give to investors?
The Indian markets have also seen a decent recovery in the last one month, largely in response to the rebound in the global counterparts and taking note of the measures announced by the government and RBI to fight the COVID-19 pandemic. However, we feel it’s a breather after a sharp plunge and expect the volatility to remain high until the pandemic situation stabilizes and lockdown is lifted. Besides, the beginning of the earnings season would further add to the volatility.
We advise investors keeping bottom-up approach and invest into the businesses which are likely to regain demand once the situation normalises. Further, they should focus on fundamentally sound stocks, have decent valuation and good long term growth prospects.
- Foreign Institutional Investors have taken away a lot of money in March, now the situation seems to be subsiding. How long will it take for the same amount to be injected into the markets once again?
The FIIs selling was a result of rout across the global markets as coronavirus continued to spread to several countries creating panic amongst investors. Further, market valuations were also at the peak, which aggravated the sell-off. Since the markets are forward-looking, the biggest factor for their comeback would be subsiding of the virus concerns, not only in India but across the globe as that would help our economy to get back on track.
- From where we are right now, the world is expected to change. We’ve seen a lot of people say that things will help bring up new players to lead the market now, is this something that you believe in as well, are there any new opportunities in sectors as well that you are exploring from here on?
Post COVID19 when life comes back to normal, new business leaders may emerge. One thing is sure that the world will change around us, the businesses will also undergo a transition and those who would manage to run their operations with an edge will emerge as future leaders.
We feel the biggest beneficiary of this transition will be the IT companies- as they would not only play the role of enabler for other businesses but also benefit from the existing technical edge which they have been employing in their own business over the years.
We’ve already started noticing the change in certain businesses mainly in services like banking & other financial services, education, healthcare, food & grocery delivery etc. which were earlier running on the predominantly conventional ways. And, we have a list of companies that operate in these segments and will remain on our watch list in the coming quarters.
- Medical insurance has been made mandatory by the Ministry of Home Affairs. Is this time to pick insurance stocks then as renewed business comes towards them?
There is no doubt that the pandemic would lead to more number of people opting for health and life insurance as the insurance industry has very low penetration in India.
The long-term prospects of insurance stocks do remain bright however the insurance sector is expected to be adversely impacted by the increase in the number of claims due to COVID-19 and claims due to disruption in business activities. The recent recovery in the insurance stocks after a sharp decline is indicating a similar trend. Thus, from a long-term perspective, insurance stocks can be accumulated in a phased manner.
- Banks and NBFCs are in a tricky situation right now. Banks have been asked to lend more, there also the risk of more NPAs coming up in the year to come. NBFCs have got some relief from the RBI on Friday so things might change. What are your views on these banks and NBFCs, would you buy any or stay away?
The central bank has had announced several measures in the recent past- right from cutting in the key rates, NPA reclassification, liquidity infusion, etc to help the banks and NBFCs to mitigate the COVID-19 impact to a certain extent. However, we believe that given the weak business activities as a result of lockdown, there is a risk of an increase in NPAs in the coming quarters.
Given the uncertainty going forward, we would advise investors to stick to well-known names in banking viz. Kotak Bank and HDFC Bank and Bajaj Finance from NBFC space which has been delivering healthy growth and has better asset quality.
- How are you trading in these times, any particular tips for investors?
Traders are facing challenges mainly due to volatile swings across the board. And, the earnings season would further add to their worries. We’re advising them to maintain hedged positions instead of naked trades. Also, we suggest aligning their trades according to the underline trend and creating shorts as and when the opportunity arises.