Where is the nervousness in the market coming from?
There are a number of factors. The market has doubled over last year and there is bound to be some amount of profit taking or correction. Then we have rising bond yields, the strong US dollar strength and a little bit of inflation along with oil is on the cards. But you cannot have it one way. You cannot have yields at 50 bps, you cannot have oil at $30. If there is global growth, these things will rise in tandem and asset classes will see rotation.
So there is a much-needed healthy bout of correction. We have seen an inordinate flow of foreign money from FIIs through ETFs and there is bound to be some repatriation on the back of higher yields in the US. But that is a give and take on the market. This is the time to be proud about the way our vaccine rollout has played out. It was a very smooth occurrence and that is going to be the mainstay of the Indian comeback. Yes, there will be a little bit of a spike because you cannot have a second wave without that. But look at the ground reality, look at the surging auto sales, the consumption durables, consumption of electricals. We have got a hot summer coming and people are gearing up for that.
We are seeing a sectoral rotation in the US. What about India? Should one be buying at the current level and if yes, which are the areas you would be keen on?
This is the much needed correction which investors should be using to buy. Metals are hitting all-time highs. Technology is doing well. Pharma is doing well. And if you were looking for good banks, then this is the time. Most of our banks have raised money during the worst of times and are sitting on very good liquidity. In fact, higher yields should mean more profit on the treasury side.
I am not in the camp which is going to be bearish. I am extremely positive and the much needed correction is the last shot in the arm. Call me again closer to the end of this month and you may see 15,400 being re-tested. This week itself there should be a bottoming out and then a slow and steady move back towards a new high.
