Markets May Take A Year To Bounce Back, Says Envision Capital's Nilesh Shah
The stock markets may take nearly 12 months to bounce back as central banks around the world struggle to manage soaring inflation, according to Envision Capital’s Nilesh Shah.
In the last two decades, markets witnessed “big rallies” followed by “steep corrections” and then an "immediate" bounce back, Nilesh Shah, founder and chief executive officer at Envision Capital, told BQ Prime’s Niraj Shah in an interview.
“Maybe this time around, it may not be just an immediate crash, and it may not be essentially an immediate rise,” he said. “It may be something which could probably be more protracted, long drawn than the cycles we have seen in the last 10-20 years.”
According to Shah, while the economic recovery could be faster, the market recovery will lag. “For once, maybe the economy might be ahead of the market, or the markets could be lagging the economy.”
While inflation remains a concern, Shah said corporate India and the rural or farm economy will be two pockets of the economy that stand to benefit from it. High single-digit inflation is “good” or “hygienic” for businesses, and may aid earnings growth, Shah said.
Key Themes
The portfolio manager is “significantly focused” on the manufacturing industry in the medium term, as he expects growing capex cycle and increased competitiveness to drive demand.
Shah's portfolio is also centered around themes of manufacturing-led businesses involving chemicals, auto components, defence and textiles, among others.
He advises investors to bet on "distributor of insurance" services like PB Fintech Ltd. (parent of Policybazaar.com), instead of "manufacturer of insurance".
“In the very short term, their stock prices are still going to be hugely correlated with how the U.S. markets behave, how the Nasdaq behaves, and all of that. There might be still a disconnect between essentially the stock prices as they keep falling, but the underlying value of the business will probably keep expanding, because these are businesses which are growing at 30-40%,” he said.
Among the IT services companies, Shah is upbeat on mid-tier IT companies witnessing higher growth rates as compared to top-tier IT companies in India.
“While there is more risk-off in the tech space, in the new age space, be more focused and watch out for those tier-II, mid cap IT companies rather than looking at those big boys.”
Watch the full interview here:
