By: Nikhil Kamath
As the rollercoaster of a yr – 2020 – comes to an finish, we see ourselves on the peak of a bull market which no one may have seen coming particularly in the course of the March lows. This sheer unpredictability of the capital markets makes it tough for one to predict what lies forward however refined cues for sectors/themes which are poised to excel are there to be seen.
Coming into 2020, rational traders believed that the markets have been overvalued and in contrast to the earlier market crashes i.e GFC and dot com bubble burst that are examples of market failures, the 2020 crash was prompted due to a world pandemic which very merely put, paused the worldwide financial engine.
Once the results of the pandemic have been normalised, companies with larger capital reserves have been in a position to return to normalcy so much sooner than others however everybody barring a number of sectors are on the trail to recovery. Some sectors like aviation, hospitality proceed to see ache by way of no fault of their very own however sectors like actual property, agriculture which have been in any other case dormant segments of the economic system are exhibiting indicators of resurrection. This structural shift in the financial engine will give traders new avenues to make investments.
Looking forward, low-interest rates which propagate liquidity and excessive inflation will proceed to drive money into capital markets. FII inflows, which hit an all-time excessive in November, will proceed to pour into the markets due to the weak point in the greenback as seen in the dollar-cost index.
At the bottom degree, consumer-facing sectors, particularly discretionary items and companies will proceed to be subdued as customers concentrate on shoring up their disposable revenue due to the uncertainty across the short-term impact of COVID and the vaccine. Policymakers have centered on offering funding to focused sectors which have the flexibility to spur demand for items and employment throughout a number of sectors.
I believe the approaching yr might be much less risky than the final. The pandemic introduced with it unbelievable quantities of uncertainty round which sectors will dwell by way of the financial downturn. Markets typically overestimate an issue, to start with, and course-correct with a vengeance.
I imagine the Indian Economy possesses immense quantities of progress potential and on the present juncture, discovering worth in sectors/corporations is what one should concentrate on. It might be prudent at this juncture to concentrate on inherent fundamentals and ignore a lot of the noise.
(Nikhil Kamath is the Co-founder and CIO, True Beacon and Zerodha. The views expressed by the writer are his personal. Please seek the advice of your funding advisor earlier than investing.)