Indian equity markets are likely to stay volatile over the next couple of months due to central banks’ measures to tighten financial conditions, reign in inflation, and likelihood of Chinese Central announcing stimulus measures. Nifty will continue to be volatile but range-bound in a broad range of 15300 to 16800 in the next three months, said Nishit Master, Portfolio Manager, Axis Securities in an interview with Harshita Tyagi of FinancialExpress.com. Quality Banks, Oil & Gas, Auto, Hospitality, Hospitals, Film Exhibitors, and Large Cap IT stocks are among good bets for the investors, Master added. Here are the edited excerpts from the interview.
Q. Markets have been extremely volatile lately, what is the reason?
Markets are reacting to two different opposing forces. On one hand, the US and EU Central Banks are taking/expected to take measures to tighten financial conditions to reign in runaway inflation, and on the other, the Chinese economy is expected to open up post-Covid induced lockdowns, and the Chinese Central Bank is expected to announce stimulus measures. We believe that the markets will continue to stay volatile over the next couple of months due to these opposing variables before it stabilizes.
Q. Buy the dip or Sit on cash till further correction: what is the ideal strategy for investors to sail through this volatility?
This correction is offering investors a good level to increase their equity allocation if their investment horizon is more than three years. For traders, this market can lead to significant risks. We believe that in the current market, one should increase his/ her equity allocation gradually so that the investor can reap its benefits in the medium to long term.
Q. Where do you see Nifty heading in the next three months? Will we see it rallying towards 17,500-18,000?
We believe that the Nifty will continue to be volatile but range-bound in a broad range of 15300 to 16800 in the next three months but expect the second half to be far better off than the first half for stocks this financial year. Our financial year-end target for Nifty is close to 20000.
Q. LIC listing disappointed investors as shares began trading at a discount to the IPO price. What should investors do?
LIC is a strong franchisee and is available at decent valuations, but there is a risk of continuous supply from the government to meet disinvestment targets in the medium to long term, which will cap the upside. If one has a long-term view, our advice would be to stay invested in the stock.
Q. RBI recently hiked rates and markets had a knee-jerk reaction to the same falling 2% on the day. There are expectations of another hike in June MPC. Where do you see rate-sensitive stocks -like banks, auto, and realty in this scenario?
The reaction to the RBI rate hike was negative because it was an unscheduled hike that the market was not expecting. Now the consensus is already building on another rate hike in June MPC, and thus the reaction from the market should be more muted. We believe good quality Private sector and PSU banks can do very well in a rising interest rate environment as they can re-price their assets faster than their liability, which can lead to NIM expansion. Though Auto and Realty can be hit due to higher interest rates, if there is softening of steel prices globally, Auto too could do well as the demand environment is still strong.
Q. What are the key themes, sectors, and stocks that investors must look at this year for good returns?
The focus should be on quality and businesses which can generate good FCF. Some sectors which can do well include Good quality Banks, Oil & Gas, Auto, Hospitality, Hospitals, Film Exhibitors, and Large Cap IT.
(The stock recommendations in this story are by the expert and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)