Even as the domestic stock market remains volatile, Munish Aggarwal of Equirus Capital says that unless there is a major drop in the probability of Narendra Modi-led government getting re-elected in 2019, these corrections should be short lived.
Even as the domestic stock market remains volatile tracking cues from the political scenario, crude oil prices and hardening interest rates, Munish Aggarwal of Equirus Capital notes that sentiment relating to Modi’s re-election in 2019 will drive Sensex, Nifty. According to the expert, the recovery in corporate earnings ably supported by reforms ahead of the crucial 2019 polls will decide the future course of the stock market. In an exclusive interview with Sushruth Sunder of FE Online, Munish Aggarwal, Director – Capital Markets, Equirus Capital shares his views on the stock market outlook, upside and downside triggers, primary markets and his outlook on mutual funds in India. Here are the edited excerpts-
What is your near to medium-term outlook for the stock markets?
We believe that the recovery in corporate earnings which will be further supported by government push in light of upcoming elections will act as a strong pivot for Indian markets and should help them weather adverse changes in crude oil prices, hardening interest rates and currency depreciation. We believe that any major changes in political landscape will drive sentiments and cause significant market movements but unless there is a major drop in the probability of current regime getting re-elected, these corrections should be short lived.
What are your views on the upcoming RBI monetary policy?
RBI policy will be an interesting event as the central bank needs to balance growth/ inflation vs exchange rate – an increase in interest rates may reduce the pressure on currency but will negatively impact growth in Indian economy and may put further pressure on already weak balance sheets of Indian banks.
The IPO markets seem to have taken a breather. What are the upcoming IPOs which investors can look to invest?
Issuers tend to look at stable, up-trending markets for launching transactions, especially IPOs which tend to have a long market exposure between the date of deciding price band to closing of the offer period. We believe that as markets stabilize issuances as well as filings for new issuances will pick up.
Equity mutual fund inflows have seen a strong influx in the recent times. What is your advice to investors?
Structural changes in Indian economy and unattractiveness of alternate investment opportunities means that inflows into mutual funds will continue to remain strong. However, investors need to realize that 2017 was a phenomenal year and it may not be practical to expect similar returns across investment horizon.
There seems to be an earnings bounce back in the latest quarter. Which sectors have done well in your assessment, which sectors must investors look at?
After a long period of disappointments majority of companies/ sectors reported healthy earnings. In our analysis and barring a few sectors, the improvement has been broad-based and seems sustainable.
This interview was originally published on 31 May 2018 on www.financialexpress.com