Volatility in the markets will likely sustain for the next three years and the task of making money is going to be very difficult, according to S Naren.
The central bank bull market ended the day the U.S. Fed said inflation is not transitory and it will raise rates to contain it, according to the executive director and chief investment officer at ICICI Prudential Asset Management Co. "However, volatility isn't a negative word ... Money can be made when the market is down as well.”
Naren is referring to the pullback in Indian equities, ending the surge since March 2020 pandemic low. And the decline was exacerbated by the recent round of volatility on fears of Fed taper and Ukraine tensions.
Macroeconomic factors such as the potential first hike by the Fed, state elections across India, Ukraine-Russia geopolitics, oil prices will impact the markets, he told BloombergQuint's Niraj Shah in an interview.
Key Themes To Consider
Naren, however, expects certain sectors to still help investors make money.
“Banks have scope because they have had low credit growth for a long time now,” he said.
Other sectors that he finds “interesting” are automobiles and pharma stocks. “Autos have gone through a big downcycle for the last four-five years. IT still has expensive valuations, so pharma is looking better relative to this.”
Public sector units stocks have a lot more selective re-rating scope as the government has carefully handled their growth, he said.
Infrastructure and capital goods are attractive, too, although the sector doesn't look cheap but “cyclically might still do well because there has been a long downcycle”.
Naren advised investors to be selective on small and mid caps. ICICI Prudential AMC is also cautious over specialty chemicals because of high valuations. “We don't know whether China has left the sector or not. If they [Chinese companies] come back and compete, these valuations cannot sustain, so we've been very cautious.”
Watch the full interview here:
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