Raging Covid-19 cases has turned Indian markets volatile, and it seems volatility is here to stay. Rising cases and a paralyzed healthcare sector made Foreign investors net sellers of domestic securities. Another interesting data point is since March 10, 2021, the day when India crossed 20,000 cases is marked as the onset of the second wave. Since then there have 40 trading sessions but the markets ended in the red in 18 sessions. This clearly denotes that time for easy money is gone and to help understand how investor tread in such volatile markets Vaibhav Agrawal, Chief Investment Officer, Teji Mandi, shares investment insights.
What should be the investment strategy for a volatile market that we are in?
You should remain invested in good stocks/mutual funds. India is sitting on the backdrop of a multi-year upcycle post the covid situation. Furthermore, by August more than 50% of India should be vaccinated, which would significantly help in fighting covid. Also, time spent in the markets is more important than timing the market.
Localised lockdown, vaccine shortage, is likely to impact economic activity as well as corporate earnings. What is the kind of impact you see on markets and, what should investors do?
This will have a 1-2 quarters impact. It is not as bad as last year. Also after 1-2 quarters, things should look sustainably better. Markets are forward-looking mechanisms, so current scepticism is built into the stock price.
Metals is one sector that moving only northwards where do you see this rally ending anytime as FII’s have sold stocks worth $242 million in April 2021? Many companies have come forward and are supplying oxygen for medical purpose due you see any material impact of this?
Rally in metals should continue given developments in China. However, it is unpredictable and one should tread this sector carefully. Oxygen supply is more of a CSR activity and should not materially affect earnings.
Midcap & Smallcap stocks are outperforming, but with the economy impacted due to the second wave do you see smart money moving out of them?
Midcaps and smallcaps have certainly rallied but have also come out of a glut of nearly 3 years. Also with earnings upcycle, midcaps/smallcaps should benefit disproportionately. Hence they should continue doing well.
Once the second wave settles down which sectors will do the catching up and should one go bargain hunting at current levels in these sectors?
Sectors which have been hit hardest by the pandemic would be the natural recovery candidates. Hence names in discretionary spending/hospitality/textiles would likely be the ones to benefit once things improve.
According to data published by NSE East India’s share in new registration has increased from merely 7.7% in March 2020 to 13.2% in March 2021. Do you see this as a sustainable trend and what more needs to be done to see such numbers across India?
This is a sustainable trend. Broking companies are making significant strides in these geographies. Market participants should come together to educate new investors about market practices and risks. A lot of education modules have been coming on platforms like YouTube. Retail investors should take benefit of the same.
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