Rest Of 2022 Won’t Be ‘Significantly Better’ For Investors, Says Jefferies’ Mahesh Nandurkar

Indian rupee coins. (Photo: Napendra Singh/Unsplash)

The remainder of the year 2022 won't be “significantly better” for investors as foreign selloff would continue in the second half, according to Mahesh Nandurkar.

Of the total foreign holding of more than $600 billion (about Rs 47.5 lakh crore), an outflow of 5% has been seen, the head of research and managing director at Jefferies India told BQ Prime's Niraj Shah in an interview. “That's a meaningful number. But whether that 5% can become 10% by December, it's not impossible.”

So, his target for the Nifty 50 isn't bullish either. “Over the next 6-9 months, we'll be around just where we are today. Around 15,000-16,000 mark on the Nifty.”

Still, Nandurkar said India's economic outlook and corporate earnings growth outlook looks “pretty good”.

“13-15% earnings growth in FY23 is seen, and a similar number for FY24. Even for GDP, I'm comfortable talking about 7%+ growth for FY23. Even excluding base effect, 6.5-7% is comfortable. India is on a strong footing driven by the housing cycle recovery.”

A V-shaped recovery, he said, isn't expected from the markets. “There will be a period during which thoughts on the U.S. going into recession, enough correction for markets, the Fed going slow on hikes, commodity prices cooling off, will emerge. These could be possible reasons for the bounce. But the bounces will be small and one will get time to pick and choose.”

Preferred Themes

Nandurkar bets on the real estate, seeing an upcycle for the sector that might last 7-8 years.

“There are other ancillaries like building materials, mortgage companies and property developers to play the theme through the stock market. The best and the most direct is the property developers themselves. These are high beta stocks. Even if the fundamentals remain strong, if the market remains negative, they will underperform in the near term. But it's a long term play.”

Fast-moving consumer goods, he said, is a good defensive bet in the current environment. The headwind is the weak rural income. But it's a set that's underowned by domestic and foreign institutional investors. FMCG doesn't really get negatively impacted by the outflows because it's thinly owned.

Incrementally, rural incomes will grow helped by food inflation, which will help farmers' income, and the construction theme will also help workers that come from the hinterland. “From a near-term perspective, it's a good bet.”