Markets to remain volatile in near-term; use opportunities to build positions in cos with growth potential
时间:2024-06-26 11:46:52 阅读(143)
By Manish Jain
2022 started on a fairly strong note, full of optimism as the world was coming out of the pandemic and looked like normalcy would return and markets would continue to rally. However, the Russia-Ukraine war has come to play a spoilsport for the entire global markets. While China is staring at a stagflation sort of situation, US & EU are conclusively in a slowdown mode with the road ahead looking fairly tough. In fact, so dire is the situation that not only has the IMF cut its global growth estimates to below 3%, but even the FED continues to relentlessly tighten much beyond initial expectations.
The key narrative that is being set is that India is the best-placed market in the world. Our domestic demand remains strong, earnings estimates are intact, inflation is now well in control and the private sector capex showing signs of revival. Certainly, RBI has to be classified as one of the best central banks in the world right now. The markets certainly seem to agree with the whole India growth story. We are one of the best-performing markets in the world at the moment. However, there is more to it than meets the eye. Let’s look at the three things that can go wrong from here on:
1. Slowing exports to hurt earnings: Export-dependent sectors like IT services and pharma are likely to witness a demand slowdown due to the global recession. This will remain a key overhang and it shows in the stock performance too, where these stocks are not moving despite decent results.
2. Current account deficit: Slowing exports and strong domestic demand (thus resulting in rising imports) means that the balance of payment situation will continue to remain a key worry for the government. Crude oil and gas prices continue to remain strong and that adds to the worry. We would not rule out the situation getting as bad as 2012-14 and the GoI being forced to step in with some key measures.
3. INR depreciation: Now this will be one of the most critical things to watch out for. So far the RBI has done a wonderful job of managing the currency against the dollar. We are amongst the best performing currencies in the world right now. However, incrementally the situation is getting a little worrisome with RBI running out of dry powder to defend the currency. Our reserves have taken a beating and reached a critical level. So, other than continued tightening, we have no option. It’s a fine balancing act. Demand will take a knock if we raise interest rates further and currency will if we don’t.
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So, the conclusion is that markets, which have been volatile, will likely remain so in the next couple of months. However, an astute investor would use this as an opportunity to build a position in businesses that have strong growth franchises and have strong corporate governance practices. The proverbial Good and Clean Companies.Happy Investing.
(Manish Jain is Fund Manager, Coffee Can PMS, Ambit Asset Management. The views expressed are the author’s own and do not reflect the official position or policy of FinancialExpress.com.)
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