Wait for Q2 results to enter stock markets; smallcaps, midcaps may outperform in near term | Interview

Naveen Kulkarni, Chief Investment Officer, Axis Securities, advises short-term traders, who’ve been ready for extra correction in the markets, to wait until July-September quarter earnings

The volatility in the Indian share markets continues to persist, with the BSE Sensex hovering round 39,100, and Nifty 50 testing 11,550. From March lows, headline indices have rallied over 50 per cent, however are nonetheless 7 per cent down from record-high ranges. Naveen Kulkarni, Chief Investment Officer, Axis Securities, advises short-term traders, who’ve been ready for extra correction in the markets, to wait until July-September quarter earnings. In an interview with Surbhi Jain from Financial Express Online, Kulkarni stated that even when markets don’t right publish second-quarter earnings, the results will present readability on future prospects. In the newest ruling, SEBI mandated multicap funds to make investments at the least one-fourth of their corpuses every in large-caps, mid-caps and small-cap shares. Kulkarni sees this ruling as a catalyst for smallcap and midcap shares.

1. Investors have been ready for correction in the stock market, is it time to enter now?

It is dependent upon the funding horizon, for lengthy term traders timing the market does account for a good portion of returns, whereas for brief term traders timing is all the pieces. So, from a perspective of brief term traders, it is perhaps prudent to wait for Q2FY21 results earlier than coming into the market as publish results, the market may current important alternatives. Even if the market doesn’t right considerably publish Q2, a readability on future prospects may imply higher threat to reward ratio.

2. Is the surge in midcap and smallcap indices justified given the SEBI ruling after which the clarification?

We have been bullish on small and mid-caps for some time now as these classes have been underperformers since 2017. The SEBI ruling has turn into a catalyst for mid and small caps to carry out properly. In this atmosphere, the mid and small-cap shares are probably to outperform because the multicap class in the mutual funds can have to rebalance, and extra shopping for in the mid and small-cap house could be very probably in the longer term.

3. What are your most well-liked sectors amid market volatility?

Our most well-liked themes are Agrochemicals, Specialty chemical substances, Pharmaceuticals, Digital companies, Rural, Consumer Staples, Telecom and Automobiles. These are a few of our high most well-liked sectors at this juncture the place we proceed to see the worth.

4. Post SC verdict on AGR dues, what are your views on the telecom sector?

The telecom sector will proceed to be one of many top-performing sectors. The near term survival of Vodafone-Idea is just not at stake now however its long-term challenges are important. The sector wants to hike costs considerably to construct a long-term case for sustained returns. At this juncture, pricing challenges are important and wish to be addressed. This has turn into a crucial facet of the telecom sector.

5. How lengthy do you see mid-, small-caps outperformance to proceed? What is your near to medium term outlook?

There isn’t any straight ahead reply to this query however the outperformance might be long-lasting contemplating the lengthy interval of underperformance. In the near term, it’s extra probably that small caps and mid-caps are probably to outperform.

6. By the tip of the 12 months, the place do you see BSE Sensex and Nifty50? What are the important thing dangers going forward?

We have a December NIFTY goal of 11,300 which now we have maintained at this juncture. We don’t see important upside for the NIFTY 50 index however the broadening of the market is extra probably to end result in mid and small caps outperforming.

7. Some of the penny shares from the infra sector have surged up to 300% YTD, do you see extra shares which have the potential to turn into multibaggers?

We don’t imagine in penny shares. Very few have a tendency to be actual enterprise instances however most have their very own set of challenges that are troublesome to surmount. Hence, in the near term due to market liquidity we would see penny shares doing properly however traditionally extra folks have misplaced money than those who’ve made money in penny shares.

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