Watch out for HORECA space in October-December quarter: Ashish Chaturmohta

“Along with consumer discretionary companies, as the holiday season approaches travel and tourism-related companies are also likely to register strong growth,” says Ashish Chaturmohta, Director and Head, Advisory Research - JM Financial Services Ltd.

In an interview with ETMarkets, Chaturmohta, said: “We expect the Indian markets to be the first to reach all time high levels ahead of its global counterparts, but that event might get delayed by a quarter or so depending on how growth pan’s out" Edited excerpts:

What is powering the rally in the Indian market?
European & U.S economies have not witnessed a prolonged period of structurally high rates for a few decades, as those economies come to terms with the new normal, fear of a sharp slowdown in growth continues to be a major headwind for developed markets.

In the World of uncertainties, Indian economic activity continues to be resilient supported by domestic consumption.

This has resulted in Indian markets somewhat decoupling from Global counterparts and a resultant outperforming them relatively.

India’s consumption revival around the festive season has only helped brighten the earnings growth outlook for Indian corporates.

What is your advice to investors for Samvat 2079? Where is the market headed?
While the FII flows are uncertain strong retail and DII participation are likely to support markets in the near term.

In a world where most developed economies markets are testing Pre-covid levels, Nifty is still 38% above the pre-covid levels.

We expect the Indian markets to be the first to reach all-time high levels ahead of its global counterparts, but that event might get delayed by a quarter or so depending on how growth pan’s out.

We are in the last quarter of the calendar year 2022 – would we be able to see some fireworks, or the holiday season will keep the mood subdued?
The Oct-Dec period is filled with the festive season and record marriages after 2 years of lockdown. Business update from companies such as Titan clearly points out a strong discretionary spending trend.

In our view, the last quarter of CY22 is likely to be a boon for Indian corporates. We expect strong growth momentum in consumer/consumer durables.

Along with consumer discretionary companies, as the holiday season approaches, travel and tourism-related companies are also likely to register strong growth.

As a result, the entire HORECA (Hotels, Restaurants/QSR, Cafes) space will also be benefited.

Will the rupee depreciation continue in the December quarter?
We have seen a tremendous rise in dollars this year. On a YTD, US Dollar Index is up nearly 18.36% so far against basket of currencies. This is primarily fuelled by the hawkish monetary policy stance of the Fed to tame Inflation.

This trend is unlikely to change abruptly and will take its own due course of time before inflationary pressure starts to ease in developed economies.

Indian Rupee along with other baskets of currencies are likely to remain under pressure for a few more months before we get signs of fed fund rates peaking out which has gone from near zero levels at beginning of 2022 to 3.25% at its Sept policy meeting.

Thus, we are likely to see some more pressure on EM currencies including the Indian rupee in the near term. Having said that, India’s Foreign reserve which stands at approx. US$532.6 billion as of Sept is the 6th largest in the World (marginally behind to Russia with $540bln & Taiwan $541bln).

We have a good selloff in markets across the board – any particular stock(s) which is still a good buy on dips stocks for a period of 1 year?
We like companies and sectors with strong growth tailwinds. We like sectors such as Capital goods, financials, defence and speciality chemicals.

Within the large caps, we like ICICI Bank, Titan Industries, Maruti, SRF, and L&T Infotech. Within Mid & Small cap segments we like Gujarat Flurochem, Persistent Systems, Praj Industries, Poonawalla Fincorp & Cummins India

Any multiyear themes that have recently surfaced and could well produce wealth creators of the future?
Defence is a strong multi-year trend that is likely to be fuelled by government focus towards made-in India along with multiple export opportunities.

We have been consistently recommending the Defence themes to our Investors for quite some time. We believe companies such as HAL, Bharat Dynamics, and BEL can grow their revenues consistently at 20%+CAGR for multiple years to come.

Any sector(s) which you think investors should avoid in the December quarter? If yes, why?
As an individual investor in the current environment of geo-political uncertainties, a strong dollar and high volatility cyclical stocks like commodities can be avoided in the near term.

Although the outlook for many companies such as metal and mining has improved significantly, taking into consideration the high volatility, elections in China and uncertainty towards the Russia-Ukraine conflict keeps us cautious in the near term on the sector.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)