In an interview with ETMarkets, Agrawal said: “Once the availability is back to normal which I believe it should be in the coming quarters will be taken positively by the street.” Edited excerpts:
A volatile week for Indian markets, but benchmark indices closed flat to positive. What led to the price action on D-Street?
Global jitters rocked Dalal Street as fears of recession and inflation hurting corporate earnings spooked another sell off in the US Markets.
This market is about the macro environment more than anything else, whether its inflation, rate hikes, or the dollar strength, fund flows and what’s happening to currency, etc. Hence, macro factors continue to weigh on Indian equities.
However, on Friday the screen was looking much better as compared to the last couple of days and it all started with an overnight decline in the dollar index from the levels of 105 to below 103.
A weak dollar is positive for emerging markets and secondly, China cutting the prime lending rate is huge and was seen as some relief which led to indices clocking gains for the first time in six weeks and supported by index heavyweight stocks as well.
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We are approaching the monthly expiry next week. How is the market likely to pan out and any levels that traders should watch out for on Nifty and NiftyBank?
A sort of relief rally is playing out in the market be it large cap, or small and midcap stocks. So that’s been the range and next week will be interesting as you pointed out the monthly expiry.
The way markets have seen the momentum on Friday, it can continue next week as well but broadly will be in that range as we have seen since the last few days.
After Friday’s bounce back do you think that we might have hit the bottom? When can bulls take over D-Street with conviction?
It is tough to say in this current volatility that we have hit the bottom. Important levels to watch out for are the 15730 to 15740 lows that we saw earlier in the week and the March low of 15671.
However, India’s long-term growth trajectory remains intact, and these corrections should be used to buy the high conviction ideas.
Sectorally, IT stocks fell the most. What led to the price action? We saw JPMorgan downgrade as well. Should investors trim their positions (go underweight) in IT?
IT stocks took a tumble this week extending their year-to-date losses to more than 25% mirroring the sell-off that we had in Nasdaq and now increasingly there is so much chatter about the US recession and that’s hurting the technology spending resulting in a slowdown of growth for the IT Services.
Hence, what has happened is that the sector is getting a macro pressure point.
It’s not what you see at this point of time but what the market anticipates in the next 12 to 18 months down the line and that is where the challenge has effectively come up.
Also, the market fears that consensus expectations are way too high on the margin front so there is a margin risk as well.
But if you look at management commentary, if you see what’s going around, I think the order books, the outlook on orders and on revenues, the demand environment continues to be really positive.
The market-making hypothesis about the sustainability of the cost pressures and recession, I do believe that it will come down in the next couple of quarters as these companies scale up their fresh recruitment and scaling the business and as the attrition settles down because this kind of attrition cannot continue for a long period of time.
So I do feel that as long as the structural demand environment is holding firm, one should not be worried. Of course, in the short term, they still might continue to be laggard or sideways, but I do believe that as long as the demand environment is good, and customer demand is good they will come back.
These companies have a history of dealing with all kinds of uncertain environments so it’s not new for them.
Auto stocks topped sectors – what to the price action, and will the momentum continue in the coming week? Any stocks that are looking strong on charts?
Yes, I think some of the auto ancillaries companies have been punished a lot for more than 2+ years and a lot of fortunes were linked to exports and now there is no serious visibility on the production of semiconductors issue that will effectively improve the situation.
The demand backlog which I hear from the managements or dealers is massive including the new product launches pipeline and the only worry right now is the availability of cars vehicles.
Once the availability is back to normal which I believe it should be in the coming quarters will be taken positively by the street.
Also, the IMD expects monsoons to be good and to reach Kerala earlier than usual this year, which is again positive news for the auto sector.
Hence pretty hopeful on the auto sector and a great space to be in.
FIIs on selling spree. They have pulled out more than Rs 42000 cr from the cash segment of Indian equity markets so far in May. Time to trim positions from stocks in which FIIs hold maximum stake?
If you look at FII selling since October 2021, it is partly driven by valuation over peers and partly driven by profit booking because in most emerging markets the FIIs have lost money or made far less money when compared to India, and liquidity for them to exit.
Looking at the current scenario I don’t think that selling can get significantly worse from here as the domestic institutional investors led by mutual funds and insurance companies have so far provided a counterbalance to the market which is a big positive.
I would not suggest selling stocks because the FII is selling its stake because you also have to look at the fundamentals and earnings growth trajectory of the companies.
When we look back to the ongoing quarterly earnings, many companies so far have reported a good set of numbers barring a few despite macro headwinds. Hence, I should not blindly trim positions just because FIIs are selling their stake.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)