As rising interest yields and inflation continue to affect global market sentiment, causing volatility, Indian markets may also not escape unscathed, according to Deven Sangoi, chief investment officer at Canara HSBC OBC Life Insurance.
The past 10- to 12-day trends indicate that volatility has been impacting Nifty 50, Sangoi told BloombergQuint's Niraj Shah in an interview. But mid and small-cap indices seem to have remained largely unaffected, he said.
“Large-cap companies where global cashflows are higher and ETFs and large investors are invested will go through more volatility,” he said. Accordingly, he said, stock-specific volatility cannot be avoided and must be watched out for.
While the market rally has created a lot of scope for volatility, if the interest rate environment were to be considered, Nifty 50 is fairly valued at 15,000 and equity continues to look in a much better place than any other asset class, he said.
Financials
Indian financial sector has undergone various episodes of stress in the past—demonetisation, ILFS defaults and GST before the pandemic. Having withstood stress and churn before global happenings impacted the financial system, the banks and NBFCs have developed the resilience due to cleaner and stronger balance sheets that have heavy provisions to deal with unforeseen circumstances, Sangoi said. “Hence, the financial space looks very good overall.”
Insurance
He also expects the insurance sector to grow at 12-15% compounded over the next five to six years. India being a largely underpenetrated market, strong listed companies with unique advantages are expected to create a lot of wealth, Sangoi said. GDP growth, awareness and increased financial literacy will lead to increased penetration, aiding the relatively nascent insurance sector in India to grow, he said.
PSU
Sangoi said if the government manages a successful divestment, there can be a huge unlocking of value in the space that is currently quite cheap. PSU metal stocks, banks, defence companies, monopolistic logistic companies have underperformed despite having potential, he said.
Watch the full interview here:
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