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investment strategy: ETMarkets Smart Talk: Smart money is moving towards refining, PSB, cement, auto and realty: Gaurav Dua


“We have seen smart money moving to value stocks within the equity market lately. Underperforming sectors like refining, public sector banks, cement, and autos are among the preferred sectors lately,” says Gaurav Dua, SVP, Head – Capital Market Strategy, Sharekhan by .

In an interview with ETMarkets, Dua, said: “We expect markets to remain volatile for the next few months and could end the year closer to an all-time high level on the Nifty50.” Edited excerpts:

Where do you see markets for the rest of 2022 and any important data points to track in the coming month?
Markets have bounced back smartly from the lows seen in mid-June on the back of moderating commodity prices, decent quarterly results, and improving global cues (in terms of easing of FII selling pressure).

We believe that the current volatile phase in equity markets globally is led by soaring inflationary expectations and its fallout on monetary policy by central banks.



Accordingly, the equity market should start doing better as the inflationary pressure ease out and bulk of the policy rate hikes are behind us by the end of the current year 2022.

Hence, we expect markets to remain volatile for the next few months and could end the year closer to all time high level on the Nifty50.

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Rupee touched 80 against the USD in July. Where do you see the rupee headed in the near future? Any data points that investors should track?
In fact, INR has performed much better in the current global crisis as compared to earlier experiences in 2012/2013 or 2008/2009 period.

In the current phase, INR has depreciated by around 7-7.5% as compared to 15-20% in the earlier phases of global uncertainty.

Also, INR has depreciated against the US Dollar but appreciated against Euro, Pound Sterling, Yen, and other major currencies.

The bulk of sharp correction is behind us now and we expect more orderly depreciation in INR against US Dollar over the next couple of years.

Data suggests that FIIs like midcaps. What are your views?
Understandably, the bulk of FII selling has been in stocks where the FII exposure has been relatively high. Though it is difficult to predict FII flows in the short-term, we do expect the bulk of selling to be over now.

Consequently, the large-cap in banking, IT services and specific stocks like

should do better going ahead.

We believe that the pain in the mid/small-cap could extend for the next 4-6 months and thus, it would not be wise to increase exposure in small-cap space yet.

What are your views on auto and realty? Both these sectors rose in double digits so far in July?
Both auto and realty sectors are coming out of a long sluggish phase and are set to grow at a healthy rate for the next 3-5 years period. Autos have underperformed for the last 4 years, and the volume sales have declined during the period.

In the case of realty, the low mortgage rate and improving affordability seem to be kicked started the virtuous cycle that could last for the next 4 to 5 years. Consequently, it would be advisable to increase exposure to these two sectors.

What is your take on June quarter earnings which have come so far? Do you see earnings taking a hit in the rest of FY23?
Earning season has been a mixed bag. But interestingly, the downgrade in earnings estimates has not been significant and limited to commodity companies in the metal and cement space along with some moderation in the IT services sector.

On the other hand, the banking sector has surprised positively along with auto and realty companies where we have seen upgrade in analyst estimates.

Thus, the overall impact on Nifty consensus estimates for FY2023 or FY2024 is quite limited contrary to the expectations of a material markdown expected by some sections of the market.

Retail investors have replaced FIIs to become the backbone of D-St. How do you see this pan out in near future?
It is encouraging to see the maturity shown by retail investors at large in the past few years. Not only the retail investors taken advantage of the correction in the equity market, but the quality of stock chosen to invest has also been much better this time around.

We see a lot of focus on bellwether high-quality companies rather than the tendency to chase momentum and penny stocks as seen a few years back.

Also, we believe that equity is turning into an essential part of investment allocation for many investors now and the trend could be long-lasting in nature.

Where is the smart money seems to be moving in the rest of 2022?
We have seen smart money moving to value stocks within the equity market lately. Underperforming sectors like refining, public sector banks, cement, and autos are among the preferred sectors lately.

Also, we see some of the smart money move into real estate given the multi-year upcycle in the sector.

India’s investment Cycle is showing nascent signs of revival. Which sectors will benefit the most from the CAPEX recover?
After a long time, all three engines of economic growth (namely real estate cycle, private capex cycle and infra spending) have started to do well and would drive a multi-year upcycle in India.

Accordingly, we are positive on banks, real estate, engineering companies and select consumer companies for the next few years.

Are there any initiatives you have taken to help investors to make a better investment decision, as well as give them a secure interface to trade?
We, at Sharekhan, offer a host of research resources in terms of active coverage on 220 companies by a strong team of 14 analysts along with period strategy notes and a selection of preferred picks in large-cap and mid/small-cap space.

We all offer curated stock baskets for investors looking at creating portfolios for wealth creation over the medium to long term. These stock baskets are also available on InvesTiger – a mobile app dedicated to investors by us.

Lastly, we offer managed asset services under a PMS license. Out of in-house multi-cap strategy, Prime Picks is an innovative product in the space. We all offer third party PMS strategies to our high networth investors.

Finally, what is your mantra of picking winners for your portfolio? Is there any specific parameters you see before making buying or a selling decision?
Our investment team selects stocks from our active research universe of 220 companies. We use our proprietary research framework, 3R – which stands for Right Sector, Right Company, and Right Value.

For building portfolios, we give a lot of weightage to the Top-down approach that focuses on the understanding of macro conditions and accordingly focusing on sectors that are expected to do well over the next few years and avoid sectors with weak outlook.

The second step involves shortlisting the right companies to invest from the preferred sectors.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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