You must have noticed on the expiry day that there was not much movement in the Nifty. I do not know what will happen in the second half of the market, but most of the investors remain confused because of what is happening globally and also the kind of volatile environment that has been there. On one day, the market is in green, the next day, it is in the red territory. There is limited movement in the market currently. What is your assessment of Sensex and Nifty and also is there any specific churning that you are seeing currently?
Alok Agarwal: As you rightly pointed the volatility has definitely gone up in the last few weeks and months, but frankly as investors, given the kind of events these markets have witnessed in the last few months, we cannot really be complaining. The previous quarter started off with the tariff announcements in the US; then came the fatal attack in Pahalgam leading to an almost war-like situation between India and Pakistan. Then came the Iran-Israel conflict. So many things happened in that quarter and the markets, despite some volatility, kept moving upwards.
As investors, it is difficult to see that kind of bounce back and resilience in the markets. Fundamentally, as well, the macro numbers have been improving – be it on the actions taken by the RBI wherein they have cut the repo rates, the CRR, ensured that the system liquidity went from a deficit to a surplus, and also the capex numbers being undertaken by the government and control on the fiscal discipline.
All these factors are coming together and now GST collection numbers have improved and the corporate earnings numbers are also improving. So, things are shaping up pretty well. Yes, we are living in a world with a lot of things happening both globally and locally and hence slightly higher volatility is the price that one is paying. But markets on the whole look resilient and reasonably strong for that kind of situation.
I agree that we cannot complain more and the domestic markets are behaving very maturely to all of the global scenarios and contingent uncertainties that are coming in, but we cannot negate the fact that markets are in a pause mode at present and are looking for direction. Will the uncertainties weigh more or will the earnings season give the direction which the market needs and if yes, what are the sectors one should watch out for? The earning season starts with an IT major posting its results today. Which sectors are on your radar?
Alok Agarwal: We are very interestingly positioned. Despite the global and local developments, we are more constructive. But the interesting development that is happening in the markets is that even if we look at the previous quarter’s numbers, the Nifty 500 companies grew in the vicinity of 11 odd percent, but the Nifty 50 companies grew at only 3.5%. The bottom 450 companies actually grew at around 20% plus.
What I am trying to imply is that some of the index heavyweight sectors are the ones that are seeing the slowdown in the earnings growth and that is bringing down the aggregate numbers. Some of the sectors that are growing better, are not adequately represented in the indices, the electronic manufacturing companies, the companies on some of the real estate, some of the capital market plays, some of the NBFCs on the non- lending side as well as the lending space. Also companies in building material space like cement, and hospitals and to an extent on the tourism side, are not adequately represented in the main indices but are showing handsome growth. On the other hand, index heavyweights, the likes of oil and gas, FMCG, banking, and technology companies are not growing at a faster pace.
