Investors may start identifying good quality mid-cap and small-cap stocks for positive returns in the next three-six months, Amit Gupta, Co-Founder and CEO TradingBells, said in an interview with Moneycontrol’s Kshitij Anand.
Q) What is your call on currency? This week we saw some pullback, do you see the trend continuing in the coming week? Any levels which investors should keep in mind?
A) The escalation in the US-China trade war and rising political uncertainty in the UK drove the US dollar index (DXY) to its highest level in two years earlier last week.
We expect the currency markets to remain jittery and fuel safe-haven demand (i.e. Government Debt) until late September post which the focus could shift towards the Fed policy.
Increasing expectations of aggressive interest rate cuts by the Fed could put pressure on the USD, in turn benefiting Rupee and other EM currencies somewhat.
Q) Also, Gold has picked up steam in the last couple of months and is on the verge of touching 40,000. What would you advise investors to do now – time to buy or wait for cool-off? ETFs, gold funds are better or physical gold?
A) Traditionally, buying physical gold is rarely seen as an investment as it hardly gets cashed out or changes its form. An investment in gold is usually in the form or ETFs or Gold Funds.
Before making further investments, investors can wait for the rally to cool down and buy on any dips. With the festive and wedding season coming soon, demand for gold can further pick-up from October onwards.
Q) What are the important factors or news which will chart the direction for the market in the coming week?
A) There are some major events scheduled next week, starting with US August employment data on 6th, Indian Consumer Price Inflation (CPI) data on 12th and European Central Bank (ECB) policy outcome on the 12th as well.
With the slowdown in the economy, if the inflation readings are consistently lowered, it may further trigger interest rate cut expectations to counter the slowing growth concerns.
The main event this month which investors would be watching out for is the Federal Reserve monetary policy outcome on 18th with the expectation the US will cut interest rates by a further 25 basis points. More dovish assessment is likely to put pressure on the US Dollar later this month.
Q) The voice for small and midcaps are growing louder especially after the recent correction which we have seen in that space. Do you think that investors can start increasing their allocation towards this space though selectively and why?
A) Historically speaking, the midcap and smallcap indices have never given negative returns for two consecutive years, and they have had a dismal 2018.
Assuming they follow the same trend, we can expect good returns in the mid-cap and small-cap sectors in the next three-six months. In fact, we have started seeing some signs of accumulation in this space in the last one-two weeks.
Hence, investors may start identifying good quality mid-cap and small-cap stocks for positive returns in the next three-six months.
Q) Any small and midcap stocks which you think are available at attractive valuations and can be considered a good buy at current levels for the long term?
A) BCL Industries Ltd. and Shree Renuka Sugars Ltd. should benefit due to a hike in ethanol prices as the government looks to cut its oil import bill and replace with the Ethanol Blended Petrol (EBP).
Affle (India) Ltd. will benefit from the increasingly mobile consumer base in the country as it looks to grow its marketing platform which delivers relevant consumer engagement, acquisitions and transactions.
United Spirits Ltd. have reduced their debt which will add to their profitability.
These are some of the small/midcap stocks which are currently available at attractive valuations and considered a good buy at current levels for the long term.
Q) Despite recent measures introduced by the govt. FIIs continue to pull money out from the cash segment of the Indian equity market. Can we now safely say that the selling is due to global factors as on the policy front many steps were taken by the govt to boost sentiment?
A) Broadly, it is clear that recent FII selling was impacted due to global factors more than domestic policies. There are some hopes that we may expect some cooling in the global sentiments, as the US-China re-negotiation is expected to happen next month in October.
Also with PM Modi’s “Make in India” push, one can expect the FII flows to return to India once the dust settles and investors can continue investing in domestic markets via the SIP route through Mutual Funds if not direct Equity.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his 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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