Indian Stock Market Not Factoring In Two Key Worries, Says Centrum's Nischal Maheshwari

Markets are discounting the approaching recession in the U.S. as the domestic economy opens up and certain stocks seem "inflation-immune", according to Centrum Broking's Nischal Maheshwari.

As U.S. Federal Reserve and the Reserve Bank of India look to potentially hike interest rates and oil prices soar amid geopolitical pressures, the market is not factoring in the challenge on the growth side, Maheshwari, chief executive officer for institutional equities at Centrum Broking, told BloombergQuint’s Niraj Shah.

According to him, two trades are currently working well for domestic companies: opening up of the economy and "inflation-immune" stocks. Inflation-immune stocks, he said, include services sector that has no input cost besides salaries that have an “inflationary cost already built in”.

As schools, colleges and offices reopen, there are certain trades which people can look to play, including books, stationery, bags and paper stocks, he said. "I think there are several of them which have not been played yet.”

He also suggests "inflation-immune" stocks such as insurance, asset management companies, rating agencies and port services. But advises caution on IT services on concerns about demand if the U.S enters a recession and wage hike pressure because of attrition.

The time to reap profits from metals may be over as they are “most vulnerable” in case of a recession, he said. Governments around the world are major buyers and may delay construction projects if rates are hiked, he added. “It could be a good trade to actually short metals.”

Moreover, “easy liquidity in the markets” are driving metals right now. But rate hikes and a “70% chance of recession” may hinder the run for metals, he said.

Watch the full conversation here: