BSE Sensex and NSE Nifty 50 have almost doubled from respective March lows. Earlier this week, headline indices rose to all-time highs, taking the market capitalisation of the BSE-listed companies to Rs 199 lakh crore. Even as indices trade near record highs, Kunal Sanghavi, CFO, HDFC Securities, told Financial Express Online that 2021 may not be a repeat of the 2020 rally. According to him, 2021 will be a lot more different than 2020, as there will be no similar kind of rise from lows or the V-shaped recovery in 2021. Moreover, even short-term volatility cannot be ruled out in this calendar year. However, there are a few sectors that may offer good returns from a long-term investment horizon, Kunal Sanghavi said.
One may see a lot of sideways movement and witness different kinds of sectors moving; but the identification of the right sectors will be very critical at this point of time, he said. In this new year, markets may see certain leading sectors such as technology, where India could become a surplus exporter to the rest of the globe. Among other sectors, Sanghavi expects pharmaceuticals, infrastructure, logistics and e-commerce to outperform. “It is not about whether the markets will be good or bad. It’s more about whether one is in the right sectors or not,” he said.
The investment in right sectors will definitely appreciate from the current levels as the year 2020 formed a good base. As short-term corrections in the middle are very much on the cards, one needs to have cautious approach from a short-term perspective.
2020 vs 2008: What changed, what didn’t
Last year 2020 was a replica of what happened in 2008, Sanghavi said, drawing parallels between the two major drawdown periods. Both times, markets witnessed huge corrections and panic was at its peak. During such times, institutions globally invested their surplus cash. “While looking at certain liquidity parameters, during 2008-09, we saw liquidity was at its highest in 2009 and then it got stabilised. Now, 2018-2020 has been a period of slack and now we are seeing a rebound from an overall perspective,” he said.
Sanghavi advised that one will have to factor in the increase in the overall GDP, as India moves toward the Prime Minister’s dream of achieving a $5 trillion dollar economy. India has already crossed the $2.7 dollar economy, so far. “The vision which we are trying to achieve is leading to a lot of surplus money in the ecosystem,” he added.
From a long-term perspective, Sanghavi believes that this is the right time for the investors to enter the stock markets as global liquidity has been at its highest. After rallying to the all-time highs, equity benchmarks succumbed to profit-booking. From the record high hit yesterday, BSE Sensex has tumbled 1,045 points or 2 per cent on Friday, while the broader Nifty index plunged to 14,453, falling over 300 points.
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