Market Outlook: The stock market has recovered about 50 per cent since the fall of March. During this period, there has been good growth in some sectors like pharma, IT and sectors like banking and capital goods have been underperformers. After the recovery, the market is reaching the level of Pre Covid 19, where the valuation of some sectors is more visible. On the other hand, there is a recovery in the market, but factors like uncertainty, US Presidential election and border disputes are present in the market due to Covid 19 epidemic. In such a situation, there are apprehensions in the minds of equity or equity owned mutual fund investors. We have some of these fears UTI AMC EVP & Fund Manager – Equity, V Srinivas Have talked to.
Question 1. There has been a good recovery in the market after a fall in March – how will the equity market be for investors in the coming days?
Answer: Looking at the low of March 2020, the stock market has recovered more than 50 percent. Although speaking of this year, the market is flat since 1 January. The market was very volatile due to Covid 19 in March. People were largely unsure of what effect the lockdown might have on the Indian economy. During the last 5 months, the lockdown has been eliminated in different phases, which is leading most of the sectors to normalcy. They are also indicating to reach the pre-Covid level in the coming days. The market has ignored the decline in earnings in the current year and valued the market only on a normalized basis. It can be said that the market has recovered from Covid 19 and is on outlook earning trajectory for the next financial year.
Question 2. Which sectors are bullish in the current era?
Answer: Talking of Year to Date (YTD), Export Orient has outperformed a few select consumer sectors. Because income stability was highest in these areas. While some domestic-oriented sectors like banking, capital goods and telecom have underperformed. It is estimated that these segments are not fully benefited due to normalcy and thus good investment opportunities have been created in them.
Question 3. Most schemes in mutual funds have been negative in the last few months. What should SIP Investors do?
Answer: In the recovery phase, only a few stocks have contributed more to the returns of the index. Due to which mutual funds are underperforming. However, it is expected that more shares will contribute positively to the index, which will improve returns in mutual funds. In this case, instead of stopping the SIP, investors are advised to continue.
Question 4. The Corona crisis has seen a boom in the pharma sector, which has been an underperformer for 3 years. Will this boom continue even further?
Answer: Considering the strength in export markets and stability in domestic markets, there is a clear improvement in the income prospects of the pharma sector. The sector is also benefiting from the fact that the regulatory issue with the pharma regulator US FDA has decreased, as well as the pricing pressure in the US market has also come down. Because of this, the sector has earned more than expected in the past. But there is less possibility to surprise in the morning, while now the valuation of the sector has also become very high. In such a situation, the possibility of outperforming in this sector also seems less. Apart from this, IT is also one of the few areas in which there is a possibility of good income growth in the near term.
Question 5. Coronavirus epidemic has also created opportunities for the Indian economy? Yes, when will its benefits appear?
Answer: The biggest opportunity that Corona has created is the rapid adoption of digital methods by companies. Together, try to reduce sustainable costs with the help of digital initiatives. Both these efforts will strongly improve productivity in various fields. Cost reduction can be seen in areas with high sales and administrative costs. Some benefits are already visible in the latest results and we believe that these benefits are sustainable.
Question 6. Events like the Corona vaccine, Indo-China border dispute, US-China trade war, US election are all over the world. How do they affect the market?
Answer: Factors such as Breguet, US-China trade war, Corona epidemic and US election at the global level, then demonetisation at the domestic level, change in GST and now the situation arising from Corona are big factors. However, most of such incidents have not caused any permanent damage to the economy or markets. We believe that the economy will be successful in recovering from the temporary weakness seen due to the conditions arising from the corona.