We had a V shape recovery in the last 6 months, and the market may have difficulty in maintaining that trend in the short-term, says Satish R Menon of Geojit Financial Services
During high volatility in Indian share markets, BSE Sensex and Nifty 50 lost 4 per cent this week. Satish R Menon, Executive Director at Geojit Financial Services, believes that the equity market is near the bottom and in the next few months, more volatility is on the cards. In an exclusive interview with Surbhi Jain of Financial Express Online, Menon suggests investors to prepare a quality equity portfolio to generate wealth in the long-term. On the sectoral front, he sees consumption and pharma sectors most stable sectors in the Indian industry and holds a positive view on them. During the times of market correction, he believes defensive and stable businesses such as FMCG specifically staples, IT and Telecom may outperform the equity market. For the new investors who have just entered stock markets, Menon advises having a SIP (including lump sum) in the banking sector which is a value buy due to low valuation.
1. Post SEBI’s ruling, do you think one should now consider investing in midcap and small caps?
The regulatory change can have a positive impact in the short to medium-term, but ultimately it will depend on the MF industry’s adaptation & strategy to the new measures. Fund managers will not buy weak businesses, whereas they will attempt to revamp the objective of the schemes, accordingly. We should consider Mid & Small caps not because of a regulatory change, as it is not a revolutionary norm, but on a stock-to-stock basis as per improvement in the businesses and based on the valuations of these mid and small caps. Today, few factors helping the category is a re-opened economy, risk-reward ratio in terms of attractive valuation on a long-term basis.
2. At a time when everyone is so pessimistic about markets, where do you think investors should invest now?
We have been suggesting profit booking to traders and caution to long-term investors by buying only on dips. Today, the Indian market is trading at an important support level. Nifty50 has corrected by about 1000 pts, 8% fall from the recent high. We expect 10,300 to 10,500 to be strong support for Nifty50. The equity market is near the bottom, though volatility is expected in the next few months. Investors should capitalise from this consolidation and develop a quality equity portfolio to generate wealth in the long-term. For risk-averse investors, short-term debt and Sovereign Gold Bonds are also good opportunities.
3. Where do you see the consumption and pharma sector in the next 3 months from now?
Consumption and Pharma are amongst the most stable sectors in the Indian industry. FMCG is supported by the depth of our domestic consumption demand, especially for staples, while Pharma is getting the additional push from international demand. We continue to have a very positive view on the sector.
4. What impact do you think will US presidential elections have? Will there be a long-term implication if a change of guard happens at the White House?
In anticipation of the US presidential election, the global market is already under pressure, with increased volatility. We feel that this volatility will reduce post the outcome. In the long run, it should not matter. the market is expecting a change in guard, as per the poll survey, it should not be a negative surprise.
5. On which sectors do you bet on during market correction?
Defensive and Stable business adds safety in an equity portfolio, during the market correction. Sectors like FMCG specifically staples, Information Technology, Telecom and Agro have stable business & volume demand. They can provide decent financial performance and outperform the equity market. At the same time, sectors like Pharma and Chemical have a bullish outlook given stable domestic demand and increasing market share in the international market.
6. For someone who has to make a portfolio of 5 stocks for the next 2-3 years, then which are the three must-have stocks in that portfolio?
7. What would you advise new investors who have just entered stock markets?
We had a V shape recovery in the last 6 months, and the market may have difficulty in maintaining that trend in the short-term. It is a good time to accumulate quality companies in the next 3 months. Focus on the sectors mentioned above. And also consider to have a SIP (including lump sum) in the Banking sector which is a value buy due to low valuation, NiftyBank index is trading 40% below 7yr average of 1-year fwd P/B.
8. With the new WhatsApp channel for trading, how has been the growth trajectory of Retail investors for Geojit Financials?
We have just started the Whatsapp channel a little over 2 weeks ago. As of now, some clients have started to use this feature for information regarding the market & viewing statements and reports and some of them have also started using it for placing trades as well. Whatsapp is an evolving platform. Our aim is to automate trades through this channel, including providing Automated trade confirmations. With respect to WhatsApp channel alone, our aim is to make it the front office for customer service.