Deepak Jasani, Head of Retail Research at HDFC Securities, Says Major Mistakes Investors Repeatedly Make in Stock Markets Include Not Assessing Your Own Risk Appetite and Investing Accordingly , failing to make or adhere to an appropriate asset allocation, and review it at 6 monthly intervals.
He feels that valuations in pockets of markets appear strained – some of them may benefit from temporary events, for example electricity, coal commodities, while others may benefit from long-term trends. term such as electric vehicles, platform companies, etc.
Jasani, a market veteran for over 25 years, is a chartered accountant by profession. Prior to HDFC Securities, Deepak was Head of Equity Research at Kaji & Maulik Securities Pvt. Ltd. Edited excerpts: –
Q) What’s your take on the markets that managed to survive negative global indices and are likely poised to hit new highs in October?
A) Indian markets hit a new all-time high despite some headwinds. Fears of rising inflation, supply disruptions affecting economic growth, slower regulatory policies in China, expected withdrawal of monetary stimulus by central banks and the stagflation scenario in which the world is facing are some of the fears facing the global stock markets.
India, however, is benefiting from a seemingly controlled pandemic, the late resurgence of the monsoon, a series of improving macroeconomic figures and growing interest by global investors in India as an investment destination – both for IDE and REIT investors.
Valuations in pockets of markets appear stretched – some of them may benefit from temporary events, e.g. electricity, coal commodities, while others may benefit from long-term trends such as vehicles electrical, platform companies, etc.
The latest bullish move in the markets did not see a large participation from REITs but a larger participation in domestic retail and HNI.
Both of these categories have shown greater maturity in the markets so far in this race, but it would be crucial to monitor their behavior in the event of a larger correction.
At the micro level, survivors of disruptions over the past five years who have adjusted well will continue to do better in the future as the unorganized part of the markets shifts to organized players.
It will be necessary to follow the socio-political ramifications of the uneven increase in corporate fortunes, as well as the resulting lack of job creation and growing inequality of income and wealth, although this may not happen immediately. .
In India, the danger of high inflation (due to rising fuel prices and supply chain disruptions) and an economy struggling to grow above 6% remains. This can impact stock valuations at any given time.
Q) As we enter the holiday season with Dussehra around the corner, what advice would you give investors? The festival marks the victory of good over evil – what bad investing / stock trading habits investors should avoid?
A) The main mistakes that investors repeatedly make in the stock markets include, failing to assess their own risk appetite and investing accordingly, not making or adhering to an appropriate asset allocation and reviewing it every 6 month.
Investors also do not spend enough time studying the mood of the markets and the outlook for companies, and developing their stock selection skills.
They also don’t follow the rules of money handling – in terms of sizing positions and limiting losses by script, getting swayed back and forth in a bullish and bearish period, treating luck as a skill, etc. .
Q) What does the acquisition of the Tata Sons-Air India agreement mean for the aviation sector as well as the banking sector?
A) The banks that had loaned to Air India were not very worried as Air India is a power supply and has government backing.
When it comes to the aviation industry, private airlines that have taken advantage of Air India’s troubles may feel the heat in the future as a rejuvenated Air India (under new management) will change the competitive landscape.
Q) What is your take on the RBI’s monetary policy? The governor assured the market that he did not want to shake the boat. When do you see the central bank raising rates in the near future?
A) As widely expected, the RBI MPC kept the repo rate unchanged at 4% and continued with an accommodative stance. The MPC continued with guidance based on the state of the economy on position given the patchy recovery and uncertainty over the spread of infections.
MPC noted that growth impulses are strengthening and was reassured by the slowdown in inflation; decision-makers continued their growth-oriented policies.
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High frequency indicators for August-September – rail freight traffic; cement production; demand for electricity; port freight; electronic invoices; GST and toll collection – suggest progress in normalizing economic activity from pre-pandemic levels.
The ebb in infections, the sustained pace of vaccination, the expected record production of food grains, the government’s emphasis on capital spending, favorable monetary and financial conditions and dynamic external demand have supported this rapid recovery.
The RBI has been cautious in acknowledging that there are still downside risks to growth. Global semiconductor shortages, high commodity prices and input costs, potential volatility in global financial markets may present downside risks to the outlook for national growth.
However, accelerating the vaccination campaign and filling the gaps in health infrastructure and vital medical supplies can alleviate the economic damage from the pandemic and improve consumer sentiment, and we may see sustainable growth. in the second half of this year.
Until the third wave of covid-19 infections (if any) can inflict less economic damage, emergency economic conditions have passed, reducing the need for a wider interest rate corridor .
We expect the RBI to reverse repo rates in two phases (December and February); while maintaining an accommodating position. However, the effect of this situation on the money markets can be seen even earlier.
Q) The energy crisis is slowly spreading – could it impact the Indian economy, as well as India Inc.? How should investors play this theme in their portfolios?
A) The coal shortage and the resulting impact on power generation could also hurt economic growth in India, but the problem may soon be brought under control.
Rising crude oil prices create another set of problems in terms of increasing the cost of manufacturing downstream products and fuels, transportation costs, etc.
This can have an impact on the trajectory of inflation in India, especially if it turns out that food inflation is gradually increasing for some reason.
Investors can monitor their portfolios to see if this situation will have a temporary impact on their holdings or if the negative effect will last longer, in which case they may seek to reduce their holdings in these companies.
In addition, they could temporarily increase their positions in the producers of these energy sources until the upward momentum is triggered.
Q) The MF data for September is encouraging. Monthly SIP contribution from mutual funds crosses 10,000 crore rupee mark for the first time and industry AUMs reaching a record high of 36.73 crore lakh are historic. What are your views and where do you see the trend heading?
A) While equity assets under management are on the rise, inflows to equity funds need to increase from there. The rise in equity outstandings is faster (due to the rise in value) than equity inflows over the month.
The equity AUM for growth / equity oriented plans increased by around Rs. 3 lakh cr in the first half of fiscal year 22, while the influx into equity plans n was that of Rs. 68,551 cr.
Some of the older investors would have redeemed their holdings in times of rising. That said, the number of net entries has the potential to grow faster than what has been achieved so far.
Debt fund inflows have different triggers – relying mainly on the HNI, companies, banks and institutions that continue to move investments between mutual funds and other means (including bank deposits). / CP / CD, etc.) base.
Q) As we move into the holiday season – what sectors will be on investors’ buying radar. Do you see more traction in real estate, consumer durables, consumer goods and auto stocks?
A) The holiday season is not as important as it was some time ago to determine the winners of big spending, with most people spending throughout the year being tempted by offers and needs that arise. different times.
Real estate and consumer durables stocks have performed well in recent months and this momentum could continue for some time to come.
The auto industry is suffering from supply issues due to a semiconductor shortage and may miss out on the holiday season.
Q) The solar theme is gaining momentum in light of recent M&A activity in this space. What is your point of view and do you think the next round of multi-baggers or wealth creators will emerge from this space?
A) Solar energy is a huge industry. There are component manufacturers – crucial and normal, there are technology owners, there are EPC contractors for setting up solar projects, and then there are generators. Each of them is governed by a different set of influencers.
The first two are likely to be acquired by large players. The latter will continue to be impacted by regulatory changes and the Government will stick to its purchasing and tariff commitments.
The third ones carry less risk but they will make lower margins compared to the top line, unless they are integrated upstream. Scale and efficiency for manufacturers will determine who wins in the end.
It will therefore be necessary to continue to seek space for candidates for resumption among the first two (if these are listed) and to stick to the last two if we want normal annuity-type returns with some risks.
Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making any financial decisions.