Use corrections to add quality stocks, follow a stock-specific approach, says Jaideep Hansraj of Kotak Securities
Investors should continue SIPs as timing the market is challenging. The market is experiencing shallow corrections with high valuations. A bottom-up approach is recommended for stock selection.
Jaideep Hansraj, CEO of Kotak Securities says investors should continue investing through SIP as timing the market is a challenging task. In an interview with Mint, he says investors need to be stock-specific or bottom-up, as the top-down approach may fail. Edited excerpts:
The market is on a bumpy track. What should be our investment strategy? Is it the right time to invest in stocks or we should wait for some more correction?
Currently, with high valuations, strong liquidity and positive macro indicators, our markets are experiencing shallow corrections.
We advise our clients to continue investing through SIP as timing the market is a challenging task.
As the broader market valuations are rich, investors could use market correction as an opportunity to add quality stocks (strong business model and corporate governance) from the long-term investment perspective.
Mid and smallcap space is witnessing correction. Would you recommend bottom fishing in them?
Investors need to be stock-specific or bottom-up, as from here onwards we believe the top-down approach may fail.
Here, we advise investors to keep booking profits in midcap and smallcap stocks which are trading at stretched valuations and be selective in this space.
We have elections this year. How do you expect this major event to influence our stock market?
The likelihood of certain outcomes becomes much clearer after state elections.
We believe that the market has already factored in this information and is now considering other factors such as the possibility of a rate cut from the Federal Reserve, a forecast on the monsoon, and an announcement from the upcoming Union Budget.
We also believe that the large ‘disconnect’ between price and value may be sustained, notwithstanding the rich valuations across sectors and stocks, if the BJP were to win the forthcoming national elections in May, as is widely expected.
What is your outlook for India's growth and inflation? Is the worst in terms of inflation behind us?
The inflation trajectory has begun softening although the risks remain skewed toward the upside.
We maintain our FY24-25 headline inflation estimates at 5.4 per cent and 4.5 per cent.
We continue to expect the RBI to change its stance by end-Q1FY25 followed by rate cuts in Q3FY25.
We expect a real GDP growth rate of 7 per cent for FY24 and 6.3 per cent for FY25.
The market is still not clear on when the Fed will start cutting rates. When do you expect the Fed to start reducing rates?
US January CPI data showed a 0.3 per cent increase from December, with a year-on-year rise of 3.1 per cent against an expected annual increase of 2.9 per cent, while 10-year Treasury yield hits 4.269 per cent with a jump of nearly 10 bps, creating doubt on the likelihood of multiple rate reductions this year.
Investors have also scaled back bets that the Federal Reserve will begin cutting interest rates as soon as May.
We believe it could come in the second half of the CY2024.
Share your views on the FMCG sector. Is the weakness in rural consumption going to be more painful for them?
Q3FY24 FMCG results showed the familiar trends of weak consumption demand for staples and parts of discretionary sectors.
FMCG companies called out subdued demand conditions for Q3FY24 in rural and mass categories and continued pressure from local competition in select categories (tea, detergent bars and biscuits) due to soft input prices.
We expect consumption demand to recover only gradually over the next two to four quarters.
The low quality (in terms of value-add) of the bulk of new jobs may pose structural headwinds to a swift revival despite continued strong government and household investment.
Possible weak monsoons from El Nino conditions may further postpone consumption and rural recovery though.
What do you think about midcap IT stocks? While weakness in key Western markets persists, does it make sense to stick only to large IT firms if one wants to bet on IT stocks at all?
We believe large-cap IT companies are better bets/options for investing over mid-cap IT companies as the gap between large-cap companies and mid-cap IT is still high.
Uncertainties are not yet over for the IT sector as the inflation rate in the US is still far above its target rate, which could impact liquidity for the IT sector.
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Disclaimer: The views and recommendations above are those of the expert, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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