Here’s What Market Veterans Have To Say Amid The Current Turmoil

Market veterans advised caution amid volatility in India's equity market as the novel coronavirus rapidly spreads across the world and crude oil price declines.

The Sensex and the Nifty 50 ended marginally higher at 35,697.40 and 10,458.40, respectively, on Wednesday, recovering from their worst single-day rout in nearly five years. The Indian indices tracked the global peers that are witnessing the worst selloff since 2008 crisis as the spreading Covid-19 threatens to stall economic growth. A price war in the crude oil market only pushed the equity markets globally into a free fall.

Here's what market veterans have to say amid the uncertainties...

‘Better To Proceed With Caution'

Andrew Holland, chief executive officer at Avendus Cap Alternate Strategies, said it was better to proceed with caution, given the volatility in the markets. Coronavirus is not just a China problem, but also a global one, he told BloombergQuint, adding markets were looking for some stability and global response.

“Volatility is so high that it cannot be said if the worst is behind us... Though valuations are cheap, we cannot rely on the earnings forecasts and global growth amid this turmoil,” Holland said. “One should target the best in class companies across sectors. Expect more return in the short-medium term from stocks other than the traditional defensive stocks.”

Holland also said interest rate reduction helps but if there was a demand shock lower rates don't matter. “Fiscal help in sectors under pressure should be the target rather than interest rates,” he said.

Still, he expects India to stand out in the current scenario, being more defensive.

‘Best To Wait'

India has a triple whammy with the coronavirus, global weakness and a banking weakness, according to Chakri Lokapriya, managing director at TCG Asset Management. Against this backdrop, “it's not a time to nibble and best to wait”, he said.

Lokapriya also advised staying away from the financial sector, auto, industrial companies and PSUs, and concentrate on companies that are likely to benefit from the lower input cost and crude oil prices.

Input cost for companies like cement, chemicals and paints are expected to come down dramatically, he said. “I would add these stocks incrementally.” Public sector undertakings like Oil & Natural Gas Corporation, Power Grid Corporation of India Ltd. and NTPC Ltd. would remain “unattractive for institutional holders, though valuations might go down”, he said.

Multinational companies like staples and information technology are the “safe heavens”, according to lokapriya. He also expects paintmakers to see “intact earnings”. If there are incremental funds coming in, this space is where cash will gravitate into, he said.