Soumya Sarkar, CEO and Port Polio Manager, Sumit Capital, feels that the Indian equity market remains at risk of a downside unless inflation due to the rise in commodity prices stops. Along with this, the market will remain under pressure until there is a good solution to the ongoing tension between Ukraine and Russia.
He further said in this conversation that the US Fed can increase its interest rates 7 times between 2022-23 and this sequence of increases can start from mid-March. However, the fall in US bond yields reflects the belief of market participants that Ukraine tensions could lead to a slowdown in the global economy and further ease inflationary pressures.
Significantly, Soumya Sarkar is a well-known investment advisor based in New York. Prior to founding Sumit Capital, Soumya Sarkar worked with Deutsche Bank from 1995 to 2009 and with Credit Suisse from 1991-1995.
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In this conversation, he said that even before the Ukraine crisis, commodity prices, especially oil-gas and other industrial metals, had reached their multi-year high. This increase in prices was due to the strengthening of the global economy and supply problems.
Recent tensions between Ukraine-Russia have made this situation worse. In view of this, there has been a belief among investors around the world that RBI may soon be seen increasing interest rates. Therefore, we feel that the market remains at risk of a downside unless the inflation caused by the rise in commodity prices in the Indian markets eases up and until a good solution to the Ukrainian crisis is found.
Talking about the impact of sanctions imposed on Russia due to Ukraine crisis, he said that these sanctions will affect the global supply chain. The amount of this effect may vary from region to region. Its biggest impact will be seen in Europe. After that Asia will have to bear the heat. The US and Canada have very little business with Russia, so these sanctions will have the least impact on Canada and the US. Apart from this, both these countries are producers of oil and gas along with other major commodities. In such a situation, these countries will benefit from the increase in their prices.
In this conversation, he further said that in the current geopolitical tensions and the resulting market downturn, he is overweight on commodity companies especially oil and gas, industrial metals and mining companies. This theme is already working well. The crisis in Ukraine has created a better environment for them.
Apart from this, there will be advice to keep an eye on companies related to defense and aerospace, companies related to global shipping, companies related to cyber security. In the current geopolitical tensions, stocks related to these sectors can be seen rising.
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