Market is overdue for correction, says Avendus’ Andrew Holland

A volatile week saw the Nifty and the Sensex ending flat with the Nifty Bank underperforming. However, midcaps fared better and ended the week close to a quarter of a percent higher.

CNBC-TV18 spoke to Andrew Holland, chief executive officer at Avendus Alternate Strategies, for his take on the week gone by, while Jai Bala of Cashthechaos gives the technicals for the week to come.

On markets, Holland said, “I think the market is overdue for a correction, we all know this, what is the catalyst to help that to happen and some of the things I have been talked about over the month has been the kind of shock, or potential shock to kind of global growth because of what is happening in China, consumer spending, not following through as people were hoping. So those are the kinds of things which we are starting to see forecasting lowered. So the government has reduced the GDP forecast for the US this week, they have done recently with China.”

“The supply side is still kind of edging upwards. There are problems with input prices, commodity prices have continued to rise, industrial kind of metals, the latest one to have a big, big increase and, of course, you are going to try and push this on to the consumer, who initially might take some of this, but it is inflationary. "

"So that transition in terms of it is inflation transitory or not, I think the question marks still there. So it plays into this, the fact that the Fed will obviously taper at some point this year, probably in December. But the question is, is that going to be at the same time when growth is going to start forming globally, and that will impact earnings at some point, and that will probably cause a market correction?

On metals, Jai Bala said, “Metals I believe that it has topped barring the aluminium space that has behaved perfectly and right now NALCO is a stronger one. So if you are already within the metal space and participating, I think you must hold on to aluminium stocks, but others you should have already booked profits.”

On Autos, he said, “Autos is one of the weaker pockets but I think M&M and Maruti have potential for small bounce, a trading bounce, a quick profit-taking potential if you participate, but you have to be light on it. So something like you know, 8 to 10 percent move is in the offing for M&M, but not that big one for Maruti.”

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