What are your thoughts on the fear of global yields coming down? Do you subscribe to the argument that it is just a reason for the market to clean the froth and good quality stocks will attract flows once again?
The fact remains that when you have a V-shaped recovery in stock markets, you will have froth and there will be umpteen attempts by the market to regularly clear this out and end up making sure that you have a stronger recovery. It is typical of a bull market. There are phases of trend reversals. However, the abundance of liquidity and strengthening of the economy which will happen in the future will limit the downside. Any retracement will be a lucrative opportunity for savvy investors.
From a supply perspective of the equation, the stimulus that has been provided by the government keeps it going. However, it is the demand portion that has become unstable over the second wave of Covid now. The second wave has resulted in consumer sentiment becoming subdued as compared to the pent-up demand that had happened in the first few months of the wave one recovery. There have been job losses and salary cuts. All this does not augur well from a demand perspective.
Secondly, this has also led to a substantial increase in retail loan NPAs for the first time. These are the two factors that have actually troubled the market, kept it subdued and not allowed Nifty to break the 16,000 mark.
However, there is liquidity. And as things stabilise post the vaccination drive, things will come back into shape and the market will continue its uptrend. We remain bullish.
What are your thoughts on the re-rating of the IT sector?
Among largecaps, we continue to remain bullish on TCS. According to us, TCS results were not bad. You have had a slowdown in domestic demand. After a lockdown, the pent-up demand typically gets spilled over to the next quarter. International demand remains robust and it will continue to be strong. TCS remains a strong buy among largecaps. But what we are bullish on is the midcap space, where we find opportunities.
What is your outlook on the private banking space?
One of the reasons why Nifty is not conclusively breaking out of the 16,000 mark is also the fact that financials are affected in this Covid wave. There has been a slowdown in retail credit offtake. There is a substantial increase in retail loan NPAs. There is a slowdown in the mid-level market. It is the larger ones and the market leaders that have continued to grow their market share, but the SMEs and MSMEs have struggled. There is an effect as far as jobs and salary cuts are concerned. That is what is reflected in the NPA levels of retail loans. So there will be some amount of collection pressure in at least Q2 and Q3.
