Summary: Q1: It seems that the markets have been shaken and stirred by the recent economic developments. Have they finally put all the negative news behind? Ans: >Narrative of global central banks has changed >Markets likely to remain volatile >US Fed is focusing on managing inflation Q2: To what extent are the markets discounting the possibility of the Reserve Bank of India being very aggressive with the rate hikes over the next three to six months? Ans: >The AMC is comfortable with the possibility that RBI will have to increase rates >Difficult to say whether the markets are factoring this in >Not surprised with the recent out-of-turn rate hike, and likely hikes in June and August Q3: A lot of support has been lent to the markets by the domestic institutions and the retail investors. Do you see a sense of caution creeping in? Or, when do you think they’ll become cautious and throw in the towel as well? Ans: >Worried as regards retail investors’ participation if markets continue to fall >If retail investors were bulling at 17,000/18,000 (Nifty), they should remain bullish now as well >Foreign institutional investor selling was unbelievable >Large-caps have more safety margin compared to mid, small-caps Q4: But at 17,000/18,000 (Nifty), a number of investors were ignorant and had a laid back attitude about what the US Fed may do. The caution, or worry, has only crept in now. Isn’t that a scary sign for the road ahead for the markets? Ans: >We have been cautioning against the likely headwinds >Markets more attractively valued now than three to six months back >A further correction will make markets more attractive; investors should realise this >Good time to start systematic investment plans (SIPs) Q5: Is this a flash correction within a structural bull-run like we saw in 2020, or is there more to it? Ans: >V-shaped movement in 2020; a similar movement is ruled out for now >Synchronized liquidity support from global central banks in 2020 supported markets >No sharp rallies in the near-term. India, however, remains a good story for investors >India more attractive from a long-term perspective than most emerging markets Q6: A lot of heavy lifting was to be done by the growth in corporate earnings. Do you think this is another setback waiting to happen for the markets as India Inc copes with rising input costs amid wage pressures? Ans: >Corporate earnings are not a problem >In an inflationary market (2002-2008), corporate earnings is never a problem >Financial system in much better shape now (compared to 2017-18); can absorb shocks >Challenges were only on market valuation and not earnings Q6: Where do you think the leadership will emerge from in case the markets were to stage a recovery? Ans: >Banks and autos likely to lead >Capex-related sectors, stocks of public sector enterprises //////////////////
