'Stocks Can’t Keep On Going Up, They Need To Consolidate At Times': Rahul Sharma of Equity99
Excerpts:
Sensex Escalates 1000 points in 5 days and Nifty being above 16,600. How do you see the markets? Will the bull run continue or a downturn can be expected?
Markets are making new highs every day and currently have a PE of 25.39x. The rally in the market is driven by buying Tech stocks. Since the market has given such a huge rally in a short period of 5 days, some consolidation is evident before making another move but we do not expect any downturn.
Few experts have hinted about the valuations being expensive at current levels. Tell us if this is the right time to stay invested and if not, how should one approach the market?
Nifty50 trades at a PE of 25.39x which is not that expensive. Moreover, there are no such changes at micro or macro levels that affect the fundamentals. If you had invested in companies with good fundamentals then there is no reason to worry about such periodic corrections. Such corrections could be seen as an opportunity to add more quality stocks on dips.
We saw some correction in the previous couple of weeks in the broader markets, what possibly led to the fall? Was it mainly due to the BSE circular?
Stocks cannot keep on going up they need to consolidate at times. Post-COVID 2nd wave both small-cap and mid-cap stocks have beaten benchmark return by near 3-times. After such rally, the correction was evident which got triggered by New ASM rules introduced by BSE. BSE circular applied to just a few companies which are in X, XT, Z, ZP, ZY & Y group not having much impact on the overall market. So if not for this circular there would have been some other reasons leading to correction.
How are the FIIs approaching the markets? Which sectors are witnessing outflows and why?
So far FII have been Net Buyers in August, the policy and regulatory uncertainty in China during recent times have triggered the outflow of many FII investors. Many are reportedly looking at India which has a growing middle class and a dynamic workforce. FIIs have been buying IT, discretionary & healthcare stocks while pulling out money from banks, Industrial & utility stocks.
In the remaining four months of the current year, which sectors do you think are likely to outperform?
We are highly bullish on IT, Banks & Automobiles sectors. IT companies have announced good results for Q1FY22. We expect this momentum to continue with further improvement in numbers in post COVID period. Coming to banks it has not yet participated in the rally and once the COVID uncertainties are clear we expect them to bounce back even stronger. Automobiles stocks are expected to benefit from EV play with most companies announcing new models and we are highly bullish on this sector considering global demand for EV vehicles and the Indian government’s plan to shift to EV.
Looking at the markets at current levels, what are your top picks?
Our top picks are
Wipro – With the company acquiring Capco and continuing to declare good numbers, Wipro is our top pick with a Target price of 700-715 with a Stop-loss of 550.
ICICI Bank – Company has declared good results with NII surging 18% YoY and NIM at 3.89%. Also despite the pandemic, the company’s asset quality has not been impacted much with Gross NPA at 5.15% & Net NPA at 1.16%. We expect the stock to reach 900 levels with a Stop-loss of 770.
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