Indian Markets To Be A Tale Of Two Halves In 2023: Andrew Holland
Among EMs, relative valuations are more favourable towards China, Korea or Taiwan than they are to India, Holland said.
Inflows into India might take a hit in the first half, but will make up for it in the second half as the Union Budget 2023 was "very good" in terms of capex expenditure and tax reductions, according to Andrew Holland.
Emerging markets are looked upon as beneficiaries of recovery, Holland, the chief executive officer of Avendus Capital Public Markets Alternate Strategies LLP, told BQ Prime's Niraj Shah during an interview.
"Therefore, when looking at emerging markets, relative valuations are more favourable towards a China, Korea or Taiwan than they are to India. So, we will still receive money, but will predictably be underweight," he said.
He highlights a scenario where tech stocks in the U.S. are not as expensive as earlier and the Chinese market is an alternative, which could lead India's inflow to take a slight hit in the first half, though recovery is expected in the second.
Global Factors
Even though the U.S. jobs data stands strong, "inflation is coming", according to Holland.
The strong number is simply an extension of employee retention being longer than foreseen because there is no significant wage growth, he said.
Moreover, the terminal rate in the U.S. hovers around 5% and the dollar rate has been consistently falling. "This indicates that the Fed will have to pivot in the first of the year," he said.
He is, however, surprised at the consumer confidence not only in the U.S., but also globally, such as the European markets.
"We are of the view that the Fed has got it wrong and will have to pivot," he said.
Geopolitical tensions could also impact the market on a short-term basis, as inflation awaits "outside the door".
There is going to be a downfall certainly, perhaps in the way of "soft-landing", but there can be some kind of stark pessimism in the market, he said.
Impact Of Adani Group Stocks On The Market
Holland underscored that India's growth would continue regardless, as important factors remained positive in the budget.
"So, even though valuations may have contracted because of the Adani Group stocks, it can be seen as an opportunity for a good entry point," he said.
Sectors To Focus On
Spending on defence and renewable energy are two of the biggest global themes, which are here to stay, he said. Therefore, these two sectors are worth keeping an eye on, Holland said.
The services sector, especially tourism and hotels, is also attractive, according to him. Plus, the government's emphasis on boosting tourism also adds on to the picture, he said.
Railway spending, too, is going up and banking can also be on the investor's radar, Holland said.
The results have surprisingly "been bang on" and analysts have observed upgrades, Holland said. The key in the short-term depends on what the RBI does, he said.
If the Reserve Bank of India changes its view from being hawkish to accommodative or neutral, the market will get excited and the financial sector will experience an upside pull, according to him.
The non-banking financial companies look good too, he said.
In terms of information technology stocks, Holland suggests sticking to mainstream large caps over mid caps, considering the volatility in the current market scenario and how valuations are peaking.
Watch the full interview here:
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.