Mitul Shah, Head of Research at Reliance Securities, expects the Russia-Ukraine issue to settle down in the next 1-2 months and FPI flow to return to Indian equities soon, taking markets to a new high in 2022.In an interview with ETMarkets, Shah said that profit booking in high beta and midcap stocks is advisable as midcaps have continuously outperformed the market in the past few weeks.Edited excerpts: March closed on a strong note.However, we saw some volatility in April.But, the market managed to hold onto crucial support levels.What are your views on markets, amid uncertainty around the Russia-Ukraine conflict as well as the hawkish Fed and RBI?While equities have recovered to the pre-war levels with a gain of 4% in March ’22, commodity prices have remained at elevated levels.Commodity prices peaked in March ’22 post a demand slowdown in China.However, on account of a likely further escalation in the geopolitical issues and more sanctions by the US and other nations on Russian products, commodity prices are likely to remain high in the near term.
All major indices closed higher during March ’22, with Nifty Media gaining the most at 18.3%; Metals gained 8.9%, Oil & Gas added 8.2%, while Nifty IT gained 7.3% on rupee depreciation against the dollar.The RBI maintained its accommodative policy stance leaving the repo rate unchanged.
The central bank has acknowledged the upside risks to prices and revised the FY23 inflation estimates upwards.The GDP growth estimates for FY23 have been pared down, reflecting global economic uncertainty.The 4QFY22 earnings and management commentary will dictate the trend in the coming weeks.The Indian economy is in a good shape, given the underlying stellar corporate earnings momentum, the cleansed balance sheets, improving asset quality of the banks, levers in place for capex cycle revival and credit off-take and also probable manufacturing resurgence given PLI and other government reforms.Over the near-term, war issues and sanctions on Russian products would have high negative bearings on global and Indian equities.
We expect the current issue to settle down in the next 1-2 months and FPI flow would return to Indian equities soon, taking markets to a new high in 2022.
Monthly MF data was encouraging.We saw Rs 1.6 lakh cr flows into domestic equity funds in FY22 which is a positive sign for the market despite some heavy selling by FIIs.What do you make of the trend? Do you see this as a starting point when it comes to household money being invested in markets compared to the world?Domestic mutual funds absorbed all the selling by FPIs in the past six months.We expect retail participation to continue in the near term.We expect that SIP trend would remain strong as the return from most other asset classes is much lower than equity and equity MFs.
The pace of IPOs hitting D-Street has come down from FY22.What is the trend you foresee for FY23? Are you watching out for any big names ?India saw a strong IPO rush in FY22 with 53 companies raising Rs 1,180 billion, up 3.7x, YoY.The momentum is likely to sustain in FY23 as well.The new-age digital players that were listed on stock exchanges in FY22 included Paytm, Nykaa, Policy Bazaar and Zomato.
These companies defied the traditional valuation matrices and attracted many investors, especially the first-time retail investors, with lucrative growth stories despite their hefty valuations.In fact, these new-age digital firms raised the highest fresh capital during the year with public issues like Paytm garnering Rs 18,300 crore and Zomato Rs 9,375 crore.Paytm, in the process, became the biggest IPO ever, as it surpassed Rs 15,200 crore raised by Coal India in 2010.The year is also likely to see the biggest public issue in the history of the Indian primary market with the Life Insurance Corporation of India aiming to raise around Rs 65,000-70,000 crore from dilution of 5 per cent government holding.The company’s 31.60 crore shares are expected to hit the market in May.
While 56 companies have got the Sebi’s approval for IPO, 41 more are in the queue.Approvals to these companies will add another Rs 81,000 crore to the fund-raise pipeline.Among big names, apart from LIC, many more new-age companies are likely to come up with IPOs in the coming months.These include the likes of Oyo, Ola, Pharmeasy, Delhivery, Byjus, MobiKwik, Snapdeal, Flipkart, Swiggy and Ixigo in FY23.We have more than 10 crore retail investors on the BSE and the numbers seem to keep on growing by the day.
The retail investors seem to have come of age and we see a lot of maturities.
Could we see the same momentum in FY23? What kind of growth are you seeing from the retail investment side?The market has seen strong demat addition and investment from retail investors in the past 2 years.The market has absorbed most of the selling by FII with strong participation from retail investors through mutual funds.We expect this trend to continue in FY23 as well The market is facing inflation risk, along with increasing global interest rates.However, domestic liquidity continues to be robust.
Have you seen any big trends when it comes to investing by retail investors in equity, debt, options, or forex?In recent times, many retail investors have started trading in other options like future, option, and forex as compared to the historical trend of pure cash investment into equities or MFs.More education on newer methods and strategies for future and options have been motivating retail investors to participate through various investment instruments.The earnings season has just started.Is there any particular sector that investors should keep an eye on which could outperform or underperform? What is the trajectory you foresee for FY23?Q4FY22 is a difficult quarter with the Covid third wave impacting the business during January and February.March witnessed some recovery as fewer fatalities revived the confidence in improving health conditions and thereby diminished the risk parameters.The positive impact of reduced health hazards and subsequent opening up of the economy improved overall business conditions, manifested in the recovery in the high-frequency indicators such as E-way bills, GST collection, and power demand.However, economic recovery is traversing through a tougher path as escalated geopolitical conflict between Russia and Ukraine during the second half of the quarter has created roadblocks and has led to higher commodity and oil prices.The earnings momentum is likely to sustain for commodities and services sectors are likely to post robust numbers, though some dent is expected in the consumption sector due to elevated raw material prices and inflation.
Keeping the heightened commodity cost pressure and the supply side constraints in view, it is likely to be a challenging quarter for commodity consumers like automobiles, FMCG, cement and engineering sectors, while metals, specialty chemicals and commodity sectors are likely to outperform.
Do you think high beta stocks could see some profit booking in FY23 as interest rate pressure mounts on RBI as well as a rise in commodity prices?Profit booking in the high beta and midcap stocks is advisable as midcaps have continuously outperformed the market in the past few weeks.The RBI maintained its accommodative policy stance leaving the repo rate unchanged.The central bank has acknowledged the upside risks to prices and revised the FY23 inflation estimates upwards.The GDP growth estimates for FY23 have been pared down, reflecting global economic uncertainty.The 4QFY22 earnings and management commentary will dictate the trend in the coming weeks.
The market around the world continued watching developments in the Russia-Ukraine war, which is disrupting shipping and air freight.For domestic markets, trends in global equities, the movement of the rupee against the dollar, and crude oil prices will dictate trends in the near term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.These do not represent the views of Economic Times).