ETMarkets Smart Talk: Hold your Stocks! Gold better than equities only in the short-term: Deepak Jasani

In an interview with ETMarkets, Jasani said: “Once the global worries including geopolitical, banking turmoil etc. recede, demand for gold may fall and equities may start to perform,” Edited excerpts:

Do you see more skeletons coming out of the closet post the SVB fallout in the US markets that could put further pressure on markets?
Investors worry that banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation and that the banking turmoil may cause a recession if it sets off a credit crunch.

The second-order effects of the large rate hikes could still come out in forms that cannot be anticipated.

Another potential source of risk for the market this week is the Federal Reserve’s policy-setting meeting on March 22, with the U.S. central bank widely expected to increase interest rates. The statement of the Fed Chair will be closely watched.

Investors are waiting to see where the dust settles on the banking saga before making any bold moves.

Once the dust settles down – which stocks/sectors are likely to see a bounce back or see a reversal?
Rate-sensitive sectors could see a bounce once the rates peak out globally and in India. Realty, Auto and Consumer durables are apparent beneficiaries of this. Banks and other lenders may benefit out of MTM loss reversals on investment portfolios but their NIMs which tend to expand in a rising interest scenario may come under pressure when interest rates start to fall.

Even though the stock market is volatile – there is a breather in commodity space. What is the kind of impact you see on India Inc. earnings and respective sectors?
Commodity prices after seeing a steep rise over 2020-2021 due to supply disruptions have started to correct in late 2022 onwards.

Expectations of a slowdown in global growth have also prevented them from rising/bouncing. Consumers of commodities will benefit from the above after they run out of high-cost inventory while sellers of commodities may suffer.

In case the expectation of a slowdown gathers pace, the advantage to the buyers of commodities also may wither away as their end product demand and prices may see a dip.

We have seen some selloffs from FIIs, but how do you see flows panning out in FY24?
FIIs were net sellers of $18.46 bn of equities in FY22. In FY23 so far they have been net sellers of $4.89 bn. However, as interest rates are close to peaking out, we think FY24 could be a year of net positive flows from FIIs.

The extent of positive flows will depend on the timing of rates peaking out and whether and to what extent we will witness any first or second-order consequences of high rates/monetary tightening.

Also, once the Rupee stops depreciating, FIIs could view India more favourably.

As recession fears increase there is some action seen in Gold. Do you see Gold outperforming equity markets in FY24?
Gold seems to be a better investment compared to equities for the short term. It can move up to $2050-2060/ounce/ Rs.63500/10 gm with some small corrections thrown in between.

The demand for gold currently arises from its safe haven status, Fund (ETF) buying, Central Banks buying, and domestically as a hedge against the Rupee.

Recently, the fall in domestic gold prices has been lower than that in global prices due to the expectation of weakness in the Rupee.

Once global worries including geopolitical, banking turmoil, etc. recede, demand for Gold may fall and equities may start to perform.

What will be the likely impact you foresee on the currency in the near future amid the SVB fallout, recession fears as well as banking woes?
Indian Rupee is positioned with a weakness for the near term. This has to do with strength in the dollar, FII outflows and exports slowdown for India. It could head towards 86, once the 83 levels is taken out comprehensively.

However, later we may see Rupee stabilising/appreciating as the US dollar starts to weaken and inflows into India pick pace.

For a long-term investor – should he/she be worried? Or should they rejig their portfolio?
Investors are advised to keep reviewing their asset allocation at intervals of 3 months and reshuffle based on the asset classes going above/below the planned allocations.

This will force them to take profits in bullish times and deploy the cash raised into stocks in bearish times. They should also do a portfolio review of equities at a similar interval and trim their number and weed out non-performers (stocks that have underperformed in the past few rallies).

For investors in India story, equities still seem to be the best bet; however such reviews will help optimise the overall returns.

Which will fare better – growth or momentum stocks in FY24?
Markets may take time to pick the upward direction and hence till then one can stick to momentum stocks and keep taking small profits.

Once the interest rates peak out and the clouds over economic slowdown disperse, growth stocks could come back in favor; however, the timing of this is uncertain at this point.

Any sector that could be a dark horse in FY24?
Capital Goods and Defence related stocks could outperform in FY24.

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