“HNIs have been offloading positions and getting cautious on every rise so their positions are very light and one of the lowest seen in a long time so any dip will be bought into by them thus supporting markets well in the near term,” he said on the sidelines of AIF & PMS Conclave 1.0. Edited excerpts:
We have seen a lot of short covering by FIIs in the April series. Will this optimism last?
The markets have risen sharply over the past 8 days so some halt and consolidation can be expected anytime now. However, overall, the month of April looks like it will remain strong as FII short covering could continue till Nifty touches at least 18200 and HNIs have been offloading positions and getting cautious on every rise so their positions are very light and one of the lowest seen in a long time so any dip will be bought into by them thus supporting markets well in the near term.
Since you also run long short strategies, what is your positioning in the market now?
The core strategies in the fund are a mix of futures market-neutral meaning zero net exposure strategies using single stock futures and tail risk hedged options strategies. So, the goal is to generate alpha without being directional on the markets and there are lots of such opportunities right now and some examples are sectoral rotation, relative momentum, and volatility arbitrage. We follow a low net exposure strategy so we will have a 5-7% net long position in the current market environment.
Nifty has hardly given any return in the last one-and-a-half year. Do you see a major turnaround anytime soon?
Nifty has been undergoing a time correction since October 2021 – as per our quant and technical models, we are in the last phase of that consolidation post which we think there can be a sharp bull run for a few years. However, irrespective of the phase of the market, the opportunity is ripe for low-risk low net exposure based pure alpha focused strategies which is why we are launching our fund focused on those strategies right now.
Which sectors are you overweight on and why?
We have monthly rebalancing on our sectoral bets so 1-2 sectors out of 4 we choose every month can change in every rebalancing. For this month, the sectors that were chosen by the model were banks, infrastructure, automobiles, and public sector enterprises (PSE) and as of now, these are collectively outperforming the Nifty decently in April.
Nifty was one of the biggest outperformers in 2022 globally but other markets have left us behind in 2023. Do you think India will continue to underperform or will FIIs make a big comeback in FY24?
I think the cautious stand will continue from FIIs for a few more months but then pre-election year positivity should make a comeback and post June the markets should be more positive and overall FII flows are highly correlated to market momentum so as upside momentum builds up, they will definitely come back in a big way.