After nearly two-three years of economic slowdown, India is at an inflection point now with all indicators suggesting that economy and corporates are entering into a cycle of positive growth, said Sachin Shah, Fund Manager at Emkay Investment Managers. Shah also said that earnings growth will not only sustain but accelerate over the next two-three years looking at the signs of pick-up in the economy.
“Post-COVID, most of the listed companies have shown tremendous cost efficiencies and have also gained market share from the unorganised sector, boosting top-line growth. We believe this has placed many listed or organised players in a strong position,” he told cnbctv18.com.
Even though markets remain cautious of the fast-spreading omicron variant of COVID-19, Shah isn’t worried and says that it cannot have a lasting impact, either on the economy or capital markets.
“To my mind, the new variants can’t have a lasting impact either on the economy or on the capital markets. And the proof of the pudding is that last year in spite of the most unprecedented lockdown of global economy, the stock markets world-wide bounced back in less than two quarters, clearly showing the maturity and collective wisdom of the markets that intrinsic value of businesses doesn’t get impacted by merely a couple of quarters of lockdown or slowdown,” Shah said.
The current correction in the markets, is just a technical and much-overdue correction post a very strong rally of over 20 months, he added.
Retail participation has been the underlying support all throughout the market rally and even during the intermittent dips. Shah is of the opinion that retail inflows into mutual fund industry are unlikely to slow down in the near future even if the market slides further.
He went on to add that “Retail investors have shown tremendous amount of maturity over the last decade, in spite of the major ups & down in the stocks markets. Particularly over last five years since demonetisation, SIP flows have remained very strong and steady”.
Alternate avenues of investments, like bank fixed deposits and real estate, have been yielding lower returns year after year, whereas equities have delivered at least double-digit returns and are also much tax efficient, Shah highlighted.
However, investor sentiment recently has taken a beating due to Omicron spreading widely across the globe, tensions resurfacing between the US and China, central banks unexpectedly raising interest rates to tackle inflation and US Federal Reserve’s move to pace up asset purchases.
The headline indices have corrected by around 10 percent which has resulted in more than 20 percent slide in quite a few stocks, Shah said.
“It is in such pockets, where stock prices have corrected meaningfully by more than 20-25 percent, that there is some valuations sanctity coming back,” he added.
Shah remains quite optimistic on sectors such as private banking, automobile and auto-ancillary, engineering companies and logistics, while adding that Indian manufacturing sector in the exports space will do well.
Sachin Shah
Fund Manager, Emkay Investment Managers Ltd.
Sachin is a seasoned fund manager with over two decades of experience in the Indian equity markets. By virtue of his extensive research, Sachin realised early-on the need for a framework in which companies with evasively tricky standing needed to be filtered out very objectively, leading to the development of E-Qual Risk, EIML’s proprietary module which helps us to evaluate and compare listed companies on various aspects of governance. Sachin shares his knowledge and insights through various media interactions across print and digital platforms.
