Huge amount of foreign inflows have come into the markets over past two weeks and valuations have become rich. Gajendra Nagpal, founder & CEO, Unicon Investment Solutions tells Krishna Merchant that one can draw comfort from the fact that FIIs are here to make a long-term commitment to the growth of Indian economy. Edited excerpts:
Crude oil prices crossed $121 a barrel this week for the first time in 30 months. Is that weighing on the Indian markets?
Crude spiking above $121 a barrel is not the sole reason for the markets to slide. They were going up when the crude was at $118-119 a barrel also. The markets have rallied 10 per cent in the past ten sessions and it is just taking a breather.
Huge amount of foreign inflows have come into the markets over past two weeks and valuations have become rich. Therefore, a correction at this juncture is welcome.
Are you seeing this short-term correction as a blip on the way up?
I do not expect markets to fall significantly from these levels. The Nifty could fall by another 100-150 points but beyond that, the fall be stalled.
In the last one year, close to $30 billion have come into the Indian markets and the total outflow has not been more than $2 billion.
One can draw comfort from the fact that foreign institutional investors are here to make a long-term commitment to the growth of Indian economy. The money that has come in the last few trading sessions only endorses the view that FIIs are willing to invest for the long term.
The domestic institutional investors have been net sellers of Rs 4,209 crore since March 25, according to the secondary market data from BSE. What is scaring them away?
The DIIs are just booking profits because the market has moved up fast over last few days and I do not think that is a concern.
During the last 15 days in March they were net buyers, and it is only matter of time that DIIs will become positive because big funds still have to invest into the markets.
What is your outlook on Idea Cellular? It has rallied today on stake sale news. Is a further upside possible?
Idea Cellular is a good stock. The bigger picture for the telecom sector was spoiled but investors are finding value in some stocks.
The telecom shares, in terms of relative valuation, have good business model and no more negative surprises are expected. For the long-term, Idea Cellular and Bharti Airtel provide good investment opportunities.
Earnings season begins next week. What are the sectors that are expected to do well?
The consumption story remains intact and stocks from this sector should do well. We expect the consumption led stocks are going to do far better than investment led stocks.
Also, I expect the FMCG sector will do well. Though automobile sector may continue to be a market performer, the information technology sector stands out as investors will buy stocks that have lesser issues of corporate governance.
Additionally, stocks which are government owned and have good business model like ONGC, NTPC and GAIL will also attract money.
Given the uptrend in the realty space in past two weeks, do you feel the rally in these stocks will halt anytime soon?
Yes, we do believe in the short-term there will be challenges in the realty space as the stocks are over owned. Every rise will be met with some negative surprises.
Investors should be cautious in the short-term and have to pare down return expectations from these stocks. From a long term view, however, these stocks can surge 20-30 per cent.
