The current volatility in the stock markets indicates that these are seeking guidance from the government, even as the NBFC crisis, consumption slowdown and fall in savings hit the economy.
The current volatility in the stock markets indicates that these are seeking guidance from the government, even as the NBFC crisis, consumption slowdown and fall in savings hit the economy. Despite this, as well as deep correction, the markets have sustained on account of robust investment flows from FIIs and DIIs into top stocks, a research analyst told Financial Express Online. The markets are expected to recover going ahead if the government and the RBI addresses the above concerns, Abhimanyu Sofat, Head of Research, IIFL Securities told Ashish Pandey of Financial Express Online. HDFC Bank and ICICI Lombard can be good bets for the investors in 2019, he added.
Here are the excerpts from the interview with Financial Express Online.
How would the stock markets behave in the budget week? Should we expect more correction after budget?
The market is clearly waiting for direction from the govt with regards to challenges faced by the NBFC sector, fall in household savings rate, increase in fiscal deficit, slowdown in consumption etc. The market levels have sustained despite the deep correction in the broader markers due to strong flows from FIIs and DIIs in top 10 stocks. If we do see some actions from the RBI and Govt on the above mentioned challenges, then one may see a recovery in the broader market.
What’s your advice for the investors? Share your top bets?
It’s better for retail investors to try to have a diversified portfolio or invest in large cap stocks. Concentrated bets should be left to experts. Companies beyond top 500 have seen a correction of ~50%, which will be difficult for retail investors to handle. HDFC Bank, due consistent growth rate, can be accumulated at the current rate as we see a slowdown in disbursements to NBFCs to heap cement its market share. We feel HDFC Bank as a potential to double in market share in next 7 years.
ICICI Lombard is another top pick for 2019 despite the recent rally, as we believe recent regulatory changes, such as the rise in premiums for certain fire segments by GIC Re and motor TP premium hike, would ensure earnings upgrades going forward. The company has expanded its virtual office network to 910 from 135 in FY19 as several AI-based solutions are reducing costs and improving settlement times dramatically.
What do you expect Finance Minister to do in the upcoming budget?
FM focus needs to get back the ANIMAL SPIRIT, which has reduced dramatically due to the slowdown. Privatization could be a key which can rally change market sentiment as there is a feeling that good money is being used on loss making companies.
What do you make out of the ongoing NBFC crisis?
I think some of the excesses of the past have been haunting the industry. Though some of the challenges with regards to ALM mismatches have been repaired. Growth for the sector whole will be challenging. There are obviously some oasis with the sectors where one can continue to invest like Gold finance companies, Cholamandalam Finance and Bajaj Finance.