Pullback in market a buying opportunity; positive on energy, select travel stocks: Geosphere Capital

The new Omicron variant of coronavirus has emerged from South Africa, which has been touted as a ‘variant of concern’ by WHO. A variant of concern is the WHO's top category of worrying COVID-19 variants.

Sanger believes the South Africans did a great job in catching this variant very early.

According to him, this is definitely going to have an effect on travel in the short-term.

Also Read: 'Be vigilant', WHO tells Southeast Asia countries amid case surge, emergence of new variant

On what should be the next steps by the central banks and governments around the world, he said, “The best we can hope for is that the tapering slows down or the tapering stops. I don’t see a wholesale reversal because I don’t see a big effect but the flip side of it is that what if the central bankers see this as more of a stock market overreaction and they continue down the path of their tapering.”

Also Read: Opportunity to buy quality; people looking for excuse to book profits: Jeffries

He believes, there could be a little bit of a whipsawing as to which sectors of the market one should buy.

He said, “I definitely think the markets overdid it in terms of reaction but the question is- did the markets overdo it in the assumption that we don’t have to worry about rates rising anymore or did they overdo in terms of valuations coming down. Those are two different issues and I am trying to figure out which one it is.”

“I am more inclined to think this is not about whether central bankers are going to come to your rescue but central bankers are going to keep doing what they are doing because I don’t think they will see this as having significant long-term effects in terms of economic recovery,” Sanger mentioned.

He also mentioned that he is less convinced about IT names being safe havens.

On Paytm, he said, “I am less inclined since I am a believer that rates are going up and central banks including Reserve Bank of India (RBI) are going to tighten. I am less inclined to bottom fish in some of these companies whose first earnings are going to be several years away and therefore as the discount rate goes up, valuations come down.”

“There are quite a few to choose from, Zomato, PolicyBazaar, Paytm, Nykaa – these are the big four horsemen of the new era that have gone public. I am sure there is value and long-term opportunities in some of these but I am not out there with basket buying any or all of these names just because I believe there is a rising interest rate environment. These companies are not going to be the market leaders because they have a much longer duration on their earnings recovery and therefore, more sensitive to rising interest rates,” Sanger explained.