Nifty to hit 20,000 by March 2024 again, investors should take a deep breath: Andrew Holland

Avendus Capital’s Andrew Holland says investors should take a deep breath and consider what the market has yet to price in. “It’s too early to buy the dip,” Holland told Moneycontrol in an interview. “I don’t think the market has priced in any escalation in the Middle East, and I’m not saying it will happen. But if it did, it would have a huge impact on the global market again.”

Nifty 50 has lost about 1,000 points in the last six trading sessions. Wider markets have fallen even more steeply. On October 27, the markets opened higher. The green on the screens gave some relief to the investors.

At 10:15 am, the Sensex was up 0.73 percent at 63,607.60, and the Nifty was up 0.72 percent at 18,992.30.

What do you make of the current market situation? What should investors do?

The drivers for global markets are still to be determined. US treasury yields have been close to 5 percent for some time now, and oil prices have been on the rise. However, global markets have yet to fully price in the magnitude of the risks.

When a significant sell-off occurs, markets can quickly become oversold, and this is likely to be the case at present. Given the current global events, it is difficult to suggest that investors should buy the dips at this point. I am more constructive around the 19,000 level, but when sentiment has shifted so quickly, it is important to consider the remaining factors that the market must consider.

Also Read: As Nifty falls in the sinkhole, the trap is getting wider for Put writers

I don’t think the market globally has factored in any kind of escalation in the Middle East. I’m not saying that will happen, but if it was for any reason, then that would again have a sharp impact on the market globally.

Apart from the geo-political and macro risks, are there any local factors at play here?

Currently, local factors are more at play than global. That said, the earnings commentary from the banking sector hasn’t been supportive enough for the market to hold up. The earnings season, so far, has been okay but the banks’ managements have not given any timeline on when the pressure on net interest margins will ease out. Since banks make a big weightage, I believe they will continue to pressure the index.

Meanwhile, the mid-and smallcap space have had a great run. While you can’t paint all the companies with the same brush, several stocks in this pocket have moved significantly ahead of fundamentals. So, the normal profit-taking will continue in the mid- and smallcap space.

Also Read: Momentum fund manager says market throwing more ‘sell’ than ‘buy’ signals

So should investors completely avoid mid- and smallcaps currently or are any pockets looking interesting?

Not at all.

The only disadvantage of small- and midcap equities is the rapid depletion of liquidity when markets decline. However, as long as fundamental research is conducted on both small- and midcaps, there is no reason to refrain from investing in stocks that are of interest to one’s portfolio.

In the midcap space, the electronic manufacturing (EMS) theme is just starting out. It will be the next big story over the next four or five years. If you’ve got the right stock and the right management, you should continue to invest in them.

And back home, you believe, all factors are in place except for banks?

The IT sector also looks weak. Everyone expected poor results in the IT sector which proved to be the case. Reading through what managements have been saying, I think it is now more of ‘hope’ going forward rather than any concrete reason why you’d want to buy IT stocks. Maybe you can just hide behind IT stocks in a bad market because they’ve got good cash and they’ve got strong balance sheets.

As for banks, the net interest margin (NIM) compression is expected to persist for some time, however, they remain the primary story in the long-term as India experiences strong credit growth in the coming years.

Also Read: Daily Voice | Niraj Kumar of Future Generali bets on these 4 themes, recommends ignoring short-term gyrations

What is your view on valuations? A month back, we were at 20,000, now we are down at 18,800. Do you think now valuations are looking reasonable?

The valuations were looking reasonable to my mind anyway, even at 20,000, because I expect earnings growth to start accelerating soon. I’m less worried about that. As I said, it’s more global factors which are dictating this risk-off trade.

China, I believe, they’ve been taking either a pea shoot or a water pistol, whichever you want to say, rather than a bazooka to the problems it has. They are nibbling around at the edges to give a little bit more stability to the market and it is a cheap market. So if they come with a big bazooka at some point to kind of allay fears of the property market and build confidence in the consumer sector, that could also be a market where FIIs might move towards compared to India in the shorter term.

So you don’t see FIIs coming back to India anytime soon?

My overall view is that the interest rates will fall globally and that will attract money towards emerging markets. But in the short-term, some FII money could flow to China compared to India.

Finally, what sectors are you currently watching out for?

Defence and renewables will continue to do well. In terms of consumer spending, sectors like hotels, airlines and beverages will also do well. But, these sectors are all underneath the Nifty 50 index so I do not Nifty will go above 20,000 any time soon.

Also Read: What’s behind the market panic

Then, Nifty at 20,000 when?

My initial estimate was Nifty at 20,000 by March 2024. But, it managed to breach that by September this year itself. After the current selloff, I don’t have to throw in the towel so quickly. I am still sticking to that 20,000 by March of next year estimate of mine.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.