Mumbai, Apr 14, 2023
Short-term investors can participate and take profits provided they maintain discipline and choose stocks that are overly beaten down, said Jeloka.
Manish Jeloka, Co-head of Products & Solutions at Sanctum Wealth, expects the fourth quarter results to be a mixed bag with sectors like auto, metals, and TTH (travel tourism and hospitality) expected to post good numbers while the IT sector expected to post a muted set of numbers. Talking to MintGenie, he said retail investors should focus on stocks that have a strong franchise.
Markets ended flat for FY23. Considering the persisting headwinds, what is your outlook for the markets for FY24?
Given the current global macro environment, we expect our markets to trend sideways.
The rural sentiment has been subdued due to the impact of high inflation which is still not showing clear signs of recovery.
With recovery expected to be gradual, we believe that this will impact the revenue growth for FY2024e vs. what was earlier envisaged.
However, sectors that benefit from the government’s thrust on infrastructure or private investments would provide support.
Other factors like stable input prices would also support margins and overall earnings.
This is a market for long-term investors. But what should one do for the short term? Should they avoid taking fresh bets and go for holding cash?
Short-term investors can still participate and take profits provided they maintain discipline and choose stocks that are overly beaten down. Though the environment appears gloomy owing to slowing growth, there are pockets where the outlook is still positive.
Demand in the travel tourism and hospitality sector continues to remain strong while the cement sector is expected to witness improvement in per tonne profitability given the sequential softening of coal and pet coke prices.
What sectors are you positive about for the medium term? Can we bet on IT and banking stocks when there is much uncertainty about the economic recovery?
We believe that both banking and IT may not deliver and may not lead in terms of returns considering the strong credit growth in the base as well as the deteriorating health of global banks impacting IT spending.
The guidance that will be provided in the upcoming result season will be awaited which will give clarity regarding the outlook for the IT sector. As stated earlier, we believe that infra and capital goods space are likely to fare better than other sectors.
How can retail investors save their money in this market? What should they do to beat the market?
Given the current conditions, retail investors can focus on stocks that have a strong franchise and a history of delivering stronger growth versus competition.
These names can be in the discretionary space like Titan or Page Industries or companies like ITC which is posting good volumes and comes with a dividend yield of 3.5-4 percent.
In times of uncertainty, diversification can be helpful but there are risks attached to over-diversification too. How to strike a balance between these two?
Rightly said, apart from over-diversification being counterproductive, it is difficult to track beyond 25—30 stocks.
One can follow the broader principles like no more than 20 percent in mid-caps and no more than 15 percent in small caps to reduce volatility and do index hugging with the top 15 stocks for large caps to have a good mix.
What are your expectations from the fourth quarter earnings season? Are we going to see an upgrade or a downgrade?
We expect the fourth quarter results will be a mixed bag with sectors like auto, metals, and TTH (travel tourism and hospitality) expected to post good numbers while the IT sector is expected to post a muted set of numbers.
Financials are expected to post a reasonable set of numbers, and the increasing cost of funds is expected to start impacting NIMs (net interest margins) from here on.
Post a weak set of numbers in Q3FY2023, investors will be tracking the consumption sector very closely to see whether there is any improvement in demand, especially on the rural side.
We do not expect any meaningful upgrade/downgrade in Nifty earnings during the quarter and any earnings revision will be marginal at best with a bias to the downside.
Disclaimer: The views and recommendations given in this article are those of the expert. These do not represent the views of MintGenie.
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