Amidst skyrocketing inflation, geopolitical tensions and a potential rise in interest rates, the rally in global equities has come under a lot of scrutiny nowadays. Moreover, many investors are skeptical about the durability of pullback rallies. With risks emanating from global factors, it’s imperative to take a 360 degree view of the market conditions.
On this backdrop, we spoke to Anoop Bhaskar, head of equity at IDFC Mutual Fund. In a freewheeling conversation, Anoop shared his market view and offered some invaluable insights to investors.
To begin with, Anoop drew attention to the four fundamental market drivers—macroeconomic factors, growth in corporate earnings, liquidity and valuations. The webinar’s high-point was his subtle reference to the challenge of balance political cycles and market cycles.
As compared to that of 2018, the regulatory environment appears benign but global macros look deteriorated thanks to rising inflation and geopolitical tensions in Europe.
On the positive side, corporate and banking balance sheets are in good shape at present as compared to those in 2018.
Price-to-Earnings (P/E) multiples may contract hence focusing on earnings is crucial.
Market returns are likely to be back-ended rather than front ended. Meaning, the average returns for the next few years will be chiefly driven by returns in the farther periods rather than those in the foreseeable future.
Over the next 1 year, Nifty is likely to remain range-bound between 16,000 and 19,000. The breakout may happen only if crude oil drops drastically, say to USD 70/bbl or the Federal Reserve hikes interest rates only a couple of times.
India has a large market which might give it an edge in attracting giant multi-national companies.
India is likely to grab a fair share of incremental global exports. But for that, India must first prove its manufacturing prowess on the global scale and play according to its strengths rather than squandering efforts on all fronts.
India may have to attain global scale, adhere to globally competitive cost structures and build unparalleled expertise in at least a few areas of manufacturing. In this context, cotton-based textiles, two-wheelers and select auto ancillaries, to name a few, appear brighter spots.
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