[ad_1]
Edited excerpt:
Do you think we are in the midst of a bearish phase in the market or is this a correction in the bullish momentum that started after March 2020? How much pain do you see ahead?
Globally, equity markets have taken a beating in the last six months and India is no different. Overall, the Indian economy will still continue to grow strongly over the next few years and, therefore, the markets should reflect the strength of the economy in the medium to long term. It is difficult to ascertain at present how long this corrective phase will last as there are many uncertainties in the global economic environment – inflation being the biggest concern. However, after this correction, the markets have become more attractive and therefore more attractive to long-term investors.
Do’s and don’ts for investors in a falling market?
Equity investors need to have a medium to long term outlook. It is difficult to predict the market cycle in the short term, however, equities in India have proved to be one of the best asset classes for investors in the long term. In a falling market, it is important for investors to manage their risks and ensure that they have a clearly laid out asset allocation strategy.
Which areas are you most pessimistic about?
The Indian market, like many other markets in the world, is undergoing a change in structure. We expect the market leadership to change going forward. Everything goes through a cycle and we believe that this cyclical shift will likely lead to a change in leadership with very different segments of the market performing better in the future than in the past.
We’ve seen energy stocks outperform over the past few months. Can you help us understand the triggers in this pocket?
Globally, energy stocks have performed well and energy prices have risen. Mobility in India is different as most of the energy sector is owned by the government. Therefore, the global energy price rise cannot be directly extrapolated to the Indian context.
A lot of stocks like and those which were till now abandoned for their poor ESG ranking are now giving great returns. What’s behind this spec for anti-ESG stocks?
ESG as a concept is here to stay. However, the interpretation of the ESG in India has to be referred to by India’s own development imperative, where India is in its development cycle. The global norms of ESG may not be directly applicable to India as we are still in the early stages of our development cycle. You cannot apply the same criteria as ESG, especially the environmental part, when an economy is US$2,200 per capita, that you apply to an economy of US$50,000 per capita. Some of the names you mentioned have very strong cash flows and high visibility for these cash flows, which strengthens our thesis of a change in leadership in the market.
Within the IT Basket, where do you find value?
We believe that many IT firms, especially specialized IT firms, are doing very well differentiated work. These companies will continue to deliver strong growth and therefore return to shareholders if they are attractively valued. Some large and mid-cap IT companies have now corrected at more reasonable levels of valuation.
If there is a recession in the US, how do you think it could impact Indian IT services earnings?
The US is the largest market for most IT firms. Any recession in America will have a direct impact on many big IT companies. However, some niche companies will be less affected. The way we look at IT services, there are always some new areas of spending coming up. In earlier cycles, it was BPO, Application Development, infrastructure management services, etc. is the latest area of digital spending. It is difficult to predict what will be the next growth driver in IT but technology is constantly evolving. So it is quite possible that things may pick up again after a few quarters of sluggish growth due to the slowdown.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
[ad_2]
Source link
