Domestic market mirrored the terror-driven mother market, overreacted in fear due to the spread of the novel coronavirus and witnessed correction of about 32 percent recently. After this panic situation, we may see a pullback towards the range of 10,000-10,500 level, Ritesh Asher – Chief Strategy Officer (CSO) at KIFS Trade Capital, said in an interview with Moneycontrol’s Kshitij Anand.
Q. Lower circuit on March 13 and then some recovery on the bourses. What is the way ahead for the markets in the near term?
A. The domestic market mirrored terror driven mother market, overreacted in fear due to the spread of the novel coronavirus and witnessed correction of about 32 percent recently.
After this panic situation, we may see a pullback towards the range of 10,000-10,500 level. It is a frightening situation on the global front. We may witness further selling pressure if the solution for this pandemic virus is not discovered soon.
Q. Sensex and Nifty are officially in the bear market along with global peers. Historical data suggests that Nifty witnessed a fall of 25-28 percent before bouncing back. Do you think this time as well, the downside is fairly limited from here?
A. The Nifty50 has already corrected by more than 28 percent and fundamentally looking, we do not see any sign of revival with failing banking systems, political uncertainties and spread of pandemic disease which has a larger impact on economy and investors and traders sentiments. If we do not find any solution soon this bear trend may continue in upcoming sessions.
Q. What is your experience of bear markets telling you — time to catch the fear? Investors who put in money around the time when the market hit lower circuit, say 2008, have created a massive wealth over a period of time. Do you think we are in a similar situation?
A. We believe investors should not time the market and must be careful while investing their money. They should avoid putting the whole amount at one time.
From an investor's point of view, yes, the opportunity is similar to what was seen in 2008 only if you invest in fundamentally strong and sound companies.
Companies with good valuation such as high EPS, ROE, ROC and low PE will help you gain more returns compared to low-quality stocks.
Q. What are you suggesting to your clients — sit tight or put in a staggered way?
A. Currently, our advice to our clients is not to time market and take steady entry in a diversified way, in terms of sectors as well as prices.
Investors must not put all their capital in once, should instead divide and take entry at multiple levels to even out risk.
Q. The good news is that MF is still receiving inflows which means that investors still trust equities despite massive sell-off. Do you think the trend will continue or you see redemption pressure in MF sooner or later?
A. Yes, indeed we see investors' trust in the market. Also, now a day’s investors are more educated about their investment decisions. Here investors are taking the opportunity trying to build their portfolio from the bottom market.
If we talk about mutual funds, it is a long-term affair so short-lived fall will not impact the fund houses and investor’s sentiments.
Q. Where is value in this market? Most of the stocks are available at multi-year lows — how should investors decide which one is a better value play?
A. First of all, investors should check the company’s background like what is the company’s core business, balance sheet, profit and loss statement, their plan and valuations such as EPS, PE and ROCE as all these factors indicate the health of the company.
For example, EPS is the portion of a company's distributable profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability which helps in comparing the companies and look for the company with high earning power.
To find out whether the earning power of the company has improved or deteriorated EPS calculated over several years is helpful. Investors only look for the companies which usually give a steady increase in its earning per share.
Steady growth in EPS indicates how eligible the company is in making money for its shareholders and also it showcases the performance of management of the company as to how they are handling things in case of changes in profit and also managing the effect of the issuance of the new share.
Q. Any five stocks which you would like to recommend your readers, and why?
A. Here is a list of top five stocks which are looking fundamentally strong and can be bought after massive fall:
SBI is the largest public sector bank in terms of deposits, advances, customers and banking outlets fostering the nation’s 2.6 trillion-dollar economy.
There is a strong pipeline of recoveries up to 70 percent in 2020 and a healthy growth in the retail loan business. House loans grew by 17 percent, auto loans grew by 8.32 percent, and other P-segment loans grew by 5.06 percent. Steady asset quality makes SBI bank a good bet to buy.
New customer acquisition continued to be strong at 2.46 million, with total franchise came in at 40.38 million, over 24 percent growth on a YoY basis. Cross-sell franchise stood at 23.48 million, and asset under management (AUM) grew 35 percent on a YoY basis to Rs 1,45,092 crore.
Given the challenging macro conditions company’s profit before tax grew 36.9 percent YoY, while the net profit surged 61 percent YoY largely attributable to the lower tax rate. Also, the stock is available at a discount price.
Wipro is a leading information technology, consulting and business process services company. The company had a dedicated workforce of over 1.8 lakh serving clients across six continents.
If we consider the company’s half-yearly performance it registered a 4 percent YoY hike in sales, which was accompanied by the company’s cost optimisation strategy and strong client relationships that will help the company gain lost ground in the long-term.
HDFC Bank has maintained a large stable asset quality with GNPAs between 0.9-1.4 percent over FY15-FY19. Over the last 10 quarters, the bank has seen NIMs sustain in the range of 4.2-4.3 percent.
Going forward, as and when the system-wide credit demand strengthens, the bank would be in a position to unlock NIMs by redeploying excess liquidity towards higher-yielding loan assets.
In the near term, while NIM could be under marginal pressure, operating leverage and lower credit costs would prop up RoA.
The company has shown three-years average revenue growth 13 percent while the three-year average profit growth is at 19 percent.
The net worth of the company almost doubled in four years from FY15 to FY19. The company’s 100 restaurant expansion strategy and split-store strategy with an increase in same-store sales growth (SSSG) look promising for further adding to the company’s net profits.
The corporate tax cut will also add up on the company’s favor and the debt to equity ratio remains NIL all this factor indicates healthy fundamentals of the company.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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