What do you make of the market recovery? Is it a dead cat bounce? How are you viewing it?
I think the most important thing to look at this market is the volatility has started to cool off. Last week, the market was very stable. I think we have just seen a bottom for a short term. My view is that going forward, the market may not see a major seesaw. There could be some major upside in the markets.
Near term, it looks like the financials will take the lead this time and valuation comfort is much higher there. I think Nifty might have bottomed out for the near term. Secondly, most of the central bankers have been taking decisions to control inflation. The Indian government has also taken a few steps last week. So, inflation should be on the curb in the next month or so or maybe a couple of months from now.
The US bond yields have cooled off, the 10-year bond yields from the highs 3 plus or below 2.7 and all. That is also one of the things we are seeing. Global markets have been seeing some kind of support at lower levels. These three things are giving a clear indication that near term and short term the markets have taken up a bottoms out.
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There is a bit of a sector churn happening, a bit of a comeback of the banking sector. We are talking of autos picking up as well. How are you viewing these two sectors? Is there some upside given the valuation comfort?
Two things. One, obviously post the commodity prices cooling off from the near term highs, the biggest beneficiary will be the auto makers. In the last 10-15 days, the auto stocks have come up quite well. The banking stocks from the near term highs, on an average have corrected 15% to 20% and in few cases been much higher. The Q4 numbers were quite strong for most of the banks and which we like. In that perspective, valuation comfort is there and going forward, management comfort will also be there going forward.
My view is financials should do well near term. Secondly, in the last two-three months, we have seen technology stocks being hammered. Six months back, FIIs hammered financial stocks last October-November, when they started the selling spree. The first round of selling was done in financials which they had over owned.
We have been seeing that in the technology space. Till the Q1 numbers are reported, we will have some kind of selloff in the technology stocks.
What is your view on the broader markets because the real pain was actually seen on that front? Do you expect the largecaps to keep outperforming the broader markets?
Whenever there is volatility in the markets, there is a lot of uncertainty and noise on the Street. We see people tending to focus on the largecap stocks rather than midcaps.
My sense is this year would be more stock specific rather than midcap stocks. I would prefer largecap stocks this year. The Inflation commentary and margin pressures that we have seen in a lot of companies in Q4 is indicating that largecaps should be better off to play this year for the next couple of quarters till things settle. Temporarily, I think we have made the bottom at 15,800 or so.
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