Rajeev Thakkar, PPFAS on the Current State of Markets
Read about what one of the best value investors in the country has to say on where we are as far as the stock market is concerned.
Recently Parag Parikh Financial Advisory Services( fondly called PPFAS) conducted a concall with the distributors and communicated with them their thought process on their flagship scheme-PPFAS Flexicap Fund. Their CIO, Mr Rajeev Thakkar gave a broad outlook on the state of the financial markets in India. And when Rajeev speaks, the investment community listens. Here we have condensed his address on the macro-environment surrounding us. His timely words might be pacifying for the readers here.
While asking us to step back and look at the markets from a long-term perspective, he reminded us that it is not the first time something like this is happening. The steep rebound post the COVID crash of March/April 2020 was an anomaly. But if you look at it from pre-COVID levels of let’s, say Nifty of about 12,000 odd to the current levels of 15,700 it's been a normal equity journey. Thakkar emphasizes that equity cannot give outsized returns year after year and that it's always accompanied by some volatility on the downside or on the upside. It's important for the investors to stay the course to get the fat reward.
Rajeev then goes on to give his views on the three most spoken words by the folks on Dalal Street at the moment.
On Rising Interest Rates.
Thakkar says that the headlines and mayhem over the hike in interest rates are unfounded. The 7.4% yields on 10-yr govt. bonds were prevalent not very long back, i.e Feb 2019. The same is the case with US bonds. There's nothing dramatic happening here and investors need to keep things simple when it comes to investing.
On Rising Inflation.
Rajeev believes that high inflation is a concern but in the context of production losses in the COVID period, loose fiscal and monetary which really protected the demand well but curtailed supply significantly.
He believes that as the geopolitical situation improves and the war premiums on the energy/commodity prices ease off in about 6-12 months, we will see that the input costs are not much of a burden anymore. We will have something else to worry about then, Rajeev quips.
On Valuation
Thakkar says that some segments of the market have been overvalued for a long period of time. He name picks FMCG, consumer-facing stocks and the VC-backed new-age companies that are in the cash-burning phase to be expensive even at this stage.
However, he sees the banking sector and energy & utility companies at a very attractive valuation level. Interestingly, Rajeev points toward the export-facing companies, especially some of the IT names which also seem to be at reasonable valuations.
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