Traders should cautiously evaluate their trades and abide by the market discipline. The long-term investors should ignore such factors and focus on business with strong and consistent earnings growth with a prudent and experienced management, said Siddharth Sedani, Vice President - Equity Advisory at Anand Rathi Shares and Stock Brokers, in an interview to Moneycontrol's Sunil Shankar Matkar.
Edited excerpts:
Q: What is the biggest risk to India currently—is it geopolitical situation between India and Pakistan, or general elections or trade war?
A: Geopolitical situation or elections or trade war gives knee jerk reactions and should not bother long-term investment decision as there are several reasons that affect the stock market.
In the short run, these situations may make the market volatile, but in long run, the market will perform irrespective of these factors. The fundamentals of Indian markets are on a firm footing with expected earning revival in an environment of benign inflation and robust GDP growth.
Q: How do you feel about December quarter earnings season?
A: We feel that the current earnings season was better than the expected and the biggest surprise was the BFSI sector—it has shown remarkable improvement in financial performance. However, the non-BFSI performance was clearly weighed down by OMCs on the back of steep oil prices.
Among Nifty 50, twenty stocks saw an earnings beat, highest in the last five quarters. In the next quarter we may expect margins to shrink a bit due to rebounded crude oil prices, but overall the performance is expected to be robust.
Q: What should be the strategy going ahead as big events are lined up?
A: The markets are expected to be very volatile going forward. The good news is that as volatility increases, the potential to accumulating quality companies at cheaper valuation also increases. The bad news is that as volatility increases so does risk.
Traders should cautiously evaluate their trades and abide by the market discipline. The long-term investors should ignore such factors and focus on business with strong and consistent earnings growth with a prudent and experienced management.
Q: What is the next sector that will outperform markets?
A: The consumption story has played very well so far and so will it going further. With the government's focus on empowering rural India, the FMCG sector is bound to perform well. Apart from consumer, we expect positives for autos, infrastructure, private banks.
Q: Do you expect the market to reclaim its earlier record highs?
A: India is the fastest growing major economy in the world with robust fundamentals. There is no reason why the market will not reclaim the earlier record highs and grow further thereon. Indian macros are improving and now it's the turn for micros to deliver through earnings.
