The one thing that changed in the past week was FIIs turning positive on the Indian markets. Do you see this trend to be continuing going forward as well? Are you seeing the dynamics of the Indian markets changing, are we factoring in that inflation has now peaked and going forward we can expect better corporate earnings as well? How are you seeing the macro setup and the FIIs buying?
A very good point and I wish I had an answer for that. Clearly three points that we can look at; peak dollar, peak inflation and peak interest rates is when you can call a market bottom or where the FIIs should be theoretically returning.
So six days of FII positive flows are very welcome for us after the 30 billion dollars that were taken out this year. We were not alone, a lot of emerging markets saw those outflows.
In terms of inflation we do expect inflation to start cooling off. If we cut out the energy and food part of the inflation there has been a very mild, 0.1-0.2% kind of reduction globally and that is after about a 16% commodities correction as a whole.
If we take any commodity index we are about 16% off from the peak of 9th of June and if we see the market, from the lifetime highs of mid October it fell about 17% till about mid June, from there it has made a very smart recovery of 9.2%.
So a very welcome recovery but it is very difficult to say that we are out of the woods yet. Only time will tell but history suggests we are still not out of the tough times.
The good news is that legendary investors like Warren Buffett, Howard Marks have started allocation.
My gut feel is that probably this time the upsurge will go to 17200 and then there will be a turnaround.
I do not know what will be the cause of that, maybe it will be the Fed rate hike or maybe the RBI rate hike of 5th August. I do not know what the catalyst will be but we will see one more correction.
Out of the 13 indicators that I track which help me to gauge a market bottom about seven now have turned positive for our market.
If I had to ask you to pick either one sector or one stock which is on your radar what would that be?
I think we have had the
results this weekend and it will definitely set the tone for Nifty to a large extent. Overall, my top pick remains the private sector banks. PSU banks have run up in anticipation of the government moving the act in parliament but they flatter to deceive most of the time. I would stick with the top four, five private sector banks. I think a lot of runway is there and you will be well rewarded in investing in those.
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