In an interview with ETMarkets, Bhattacharya said: “We expect equity markets to remain volatile near-term. Hence, to smoothen out volatility in current equity markets, we would advise investors to invest in tranches and not lumpsum investments,” Edited excerpts:
A balanced Budget from the govt but hawkish US Fed, kept markets on the edge. What is your view on markets in the short to medium term?
If I were to look at 2023 and summarize the equity environment, I would probably say that we’re likely to face “Recessionary conditions globally before rebound” in 2023.
In the first three to six months of CY23, we’ll see the economic impact of the interest rate increases as the way that several countries have done it.
We will see the impact of the same with regard to the growth rates of the companies and the growth rates of the economy.
Once we tide through that somewhere around the second quarter of the calendar year, I think broadly global economies will probably bottom out and there can be a nice rebound economically.
Anything in the Budget which stood out? Any announcement(s) which came as a surprise, and you think is a step in the right direction?
Union Budget 2023 presented by Nirmala Sitharaman has been a landmark one which remained prudent but also paved the path for strong economic growth in the near future. One of the things that stood out for myself is the increased focus on Capital Creation.
Capital expenditure, a key variable tracked in a growth economy, is proposed at 3.3% of the Gross Domestic Product, or at Rs 10 lakh crore.
Just to put it in context, this is three times what was allocated for capital expenditure in FY2019-2020. The Indian Government’s policy response to the economic slowdown caused by the Covid-19 pandemic was centred on public expenditure.
And this year’s 33% increase indicates better times ahead for infrastructure, capital goods, railways, and defence sectors in India.
With the majority of the earnings already declared how do you sum up the December quarter earnings season?
We believe the earnings season reflects the resilience of Industrials/capital goods/infrastructure sectors, along with a weakness in urban and rural consumption, as an aftermath of high inflation.
Overall, it been a decent festive-driven earnings season so far.
Stocks/sectors that are likely to lead the next leg of the rally on D-St post Budget?
We are constructive on equity markets from a 3-year perspective. This is driven by our positive stance on the following themes which falls across multiple sectors:
Rebound in Credit Growth
Private Sector Investment Demand
Household Capex Demand
Global Market-share Gainers
Idiosyncratic Country-Specific Themes:
Beneficiaries of Govt. growth schemes,
Indigenisation of Defence
We expect stocks exposed to these themes to do well over the medium-term.
What are you telling your clients to do after the Budget 2023?
We expect equity markets to remain volatile near-term. Hence, to smoothen out volatility in current equity markets, we would advise investors to invest in tranches and not lumpsum investments.
With the economy as the center theme – how do you see small & midcaps performing?
We are constructive on mid and small-cap stocks over the medium-term. However, the valuation differential that existed between large and mid/small cap stocks has normalised over the last 12-18 months.
Going forward, we believe, the movements will likely be stock-specific and will follow the earnings upgrade/downgrade cycle of stocks closely.
As a share class, they continue to be a strong source of wealth creation for investors with a 5-10 year investing time horizon and hence, deserve a meaningful part of investors’ asset allocation.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of the Economic Times)