ETMarkets Smart Talk: 2023 will be a very topsy-turvy year with plenty of trading opportunities: R Venkataraman

In an interview with ETMarkets, Venkataraman said: “I expect we will see 1-2 more corrections this year in India as we saw earlier this when Nifty dropped below 17000 decisively” Edited excerpts:
US Fed raised rates by another 25 bps but signaled a pause – will that support growth for the global economy. What is RBI likely to do?
RBI is likely to continue its pause. We had correctly forecasted a pause in the RBI meeting on the basis that softening of crude, global growth slowdown, very low sequential inflation, etc. were factors that would make RBI give more weightage to the lag effect of hikes already done.

This still holds, all the more so now since the Fed has also signaled a pause from here on.

How should investors play India equity markets in 2023?
2023 will be a very topsy-turvy year with plenty of trading opportunities but also an excellent year for long term investors who are looking for sharp market dips to build positions in strong companies.

I expect we will see 1-2 more corrections this year in India as we saw earlier this when Nifty dropped below 17000 decisively.

The turbulence is due to timing mismatches between incoming data on inflation, policy rate cuts, economic consequences, corporate earnings impact and market reactions.

In the US additionally, market reactions and levels seem to have some influence on Fed actions. Our position for the last 6 months has been that there is a high probability of the US Fed cutting rates in 2023 itself, as the US economy has many weaknesses masked by apparently strong labor markets.Other central banks will follow. So markets should look up in the last part of the year.

FIIs are all gung-ho about India but do you also see a similar kind of positioning? If not, what could be the reason?
India is somewhat but not wholly insulated from all this both in terms of earnings and market impact, with the latter being driven by FII flows, which have been volatile in the last 9 months after a $40bn outflow in the previous 9 months.

However, some momentum in GDP growth (6%+ till now, and it may fall below 6%, but certainly not below 5% for the next 2-3 years), strong bank and corporate balance sheets, favorable policy environment etc. are some reasons for optimism that earnings momentum will not flag too much.

Plus, the geopolitical position is improving. All these reasons will make for strong FII inflows in the last part of the year.

What do you make of the crisis in Go First and will that impact the aviation sector? What is the impact you see on lenders?
Go First in an unusual move, triggered NCLT on its own, as it was unable to sort out problems with engine supplier Pratt and Whitney.

The Indian aviation sector is on a strong footing as there are two well-capitalized players – Indigo and Tata – and while the rest are struggling, the market is not a monopoly anymore, which it had seemed to be for quite some time now.

The profitability of major players should look up on crude softening, ATF softening more, volumes staying strong and yields staying high.

Gold, Silver trading near record highs – what is fuelling the optimism? What should investors do?
Gold does well in times of high inflation and high uncertainty, and that is what we have been witnessing.

Inflation has been persistent, though it has declined of late, and global central banks have raised rates, and this has caused economic stress, and the steep fall in market rates in Western economies suggests a major growth slowdown is in the offing. In such times investors search for Haven assets.

Also, after sanctions imposed on Russia by the US in 2022, many central banks have been diversifying reserves composition at the margin by buying gold.

What do you make of the De-dollarization trend? How will that impact the economy, currency as well as stock markets?
These are very long-term trends, and de-dollarization has been forecast many times in the past, but not really happened. However global trade continues to be done 88% in USD, and there does not seem to be any trend in recent years of this coming down.

In fact, in times of uncertainty, the USD will only shine a bit more than usual as a haven currency, and risk aversion will support the dollar, which goes against the de-dollarization argument.

To replace the dollar, some other currency has to take its place and the next largest economy to the US, China, does not have a freely convertible currency, so there is little risk of dollar losing its prominence in the next several years.

Any interesting results which caught your eye in the March quarter?
We find banks and NBFCs accelerate on unsecured lending. This is a factor to watch out for, and down the line a slowing economy will see more stress on borrowers in this segment.
IT sector results were large misses, and worse will follow. Cement volumes have been strong. Cap goods results will be interesting – there is plenty of talk of capex plans deferment, but cap good stocks continue to be expensive.

Any changes which you have made to your model portfolio?
We introduced DLF at Rs367 into our recommendation list as we think that interest rates are peaking, construction costs are falling, listed developers are gaining market share, so several positives.

Which sectors are you betting on in FY24 and which sectors are you reducing your weight?
Top sectors are Banks (both private and public sector), insurance, cement, building materials, real estate, utilities, telecom, FMCG, and internet. We are negative on IT, Pharma, Capital Goods and consumer discretionary.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)