If crude oil prices stabilise fast, NSE Nifty 50 could potentially rise higher and help investors pocket approximately 15% in the current year 2022, said George Heber Joseph, CEO & CIO, ITI Mutual Fund, in an interview with Kshitij Bhargava of FinancialExpress.com. Joseph talked about the impact rising crude oil prices could have on India, and named pockets where he spots opportunities for investors. Talking about the new-age internet companies, George Heber said that the sector is a ‘clear avoid’ for him even now as the valuations have been trimmed and stocks are down from highs. Here are the edited excerpts.
Rising crude oil prices have been a worry. What impact do you think it could have on Dalal Street if oil stays above $100 per barrel?
Where do you see Sensex and Nifty by the end of 2022?We believe Nifty Index can potentially generate approx 15% return in this calendar year, provided the crude oil price stabilises faster and thereby positivity returns in the second half of the calendar year.
In the recent Russia-Ukraine crisis, do you spot any pockets of opportunity for investors?We strongly believe energy prices can be higher for a few more quarters. This means in the near to medium-term oil price beneficiaries like commodities – oil & gas, coal and lignite companies to benefit, along with the INR depreciation beneficiaries like IT and pharmaceuticals. If you think a bit long term, the beneficiaries of India growth stories which are getting battered because of high oil prices & increasing interest rate scenarios have to be bought into – Auto, Banks and Infra related sectors becomes a long term buy from that perspective.
New age internet companies have fallen drastically now. Are there any of the big names such as Zomato, Paytm, Nykaa that you are looking to buy now?We have seen umpteen number of times if a big IPO happens in a sector or a large number of IPOs happen in a sector, that sector goes into super valuation model, which are not worthwhile for a value investor. This is the segment of the market which had real valuation froth because of the accentuated activities by retail investors and valuation propping up by investment bankers. Some correction has happened but there is room for massive correction from current levels. Unfortunately, the business models are not yet proven with adequate cashflows to support their growth or survival. So, for us, this segment of the market is a clear avoid even now.
Indian stock markets seem to have fallen out of favour with FIIs. What do you think is needed to bring them back?Crude oil price softening and thereby fiscal and trade deficit being in control would be the immediate triggers that can change the FII flows to India. Reform agenda of the central government needs to be seen in the form of privatisation of some of the PSU entities; also if India gets added to the global bond indices those can act as strong positive factors which would drive FII interest in India. Ultimately India is the best growth market in the entire EM pack with a stable government in place with a strong demographic tailwind of growth, so sooner or later FIIs have to look at India when considering growing their capital at a reasonable rate.
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