After March rout and April recovery in share market, why FPIs turned net buyers in May first week | INTERVIEW

Indian share markets have recovered over 22 per cent from March lows. BSE Sensex hit a 52 week low of 25,639 in the third month of the calendar year 2020. However, it is still 26 per cent off from its record high level touched in January. Sanjiv Bhasin, Director at IIFL Securities Ltd, advises investors to continue with the systematic investment plan (SIP) in mutual funds and warns of more volatility on the cards. Along with the coronavirus and ongoing corporate earnings, he also elaborates on the key triggers which are likely to impact the Indian stock market. Here are the excerpts of Sanjiv Bhasin’s interview with Surbhi Jain of Financial Express Online.

1. Amid volatility in BSE Sensex, Nifty50, where do you see the indices in next one year?

2. FPIs turned net buyers in the first week of May. What are the possible reasons behind this?

There was carnage in March and smart recovery in April. The sell-off was more with dedicated oil-related fund based selling as sharp fall in crude saw the collateral risk-based exit. In May we have better handling the crisis globally and smart money chasing high beta returns on emerging markets with India being favoured as the lowest cost of money globally sees the return of risk on the trade.

3. Which sectors and stocks do you think have potential to pick-up in the near to medium term?

Pharma has regained mojo after three years of underperformance. Cement, metals and auto are favoured sectors in short to medium term.

4. What would you advise investors before making fresh investments in the Indian stock market?

Continue with SIP in your mutual funds but be prepared for more volatility as social media and global lockdown will see more scare even though the ground reality is seeing much improvement as most countries prepare to lift lockdown and business activity makes slow returns.

5. After the second stimulus package announcement, which sectors do you think likely to benefit?

MSME, NBFC, rural, bank and auto with consumption also seeing benefits. We also think power could see more strength as it has weathered the storm well.

6. Apart from newsflow on COVID-19 and ongoing results season, which key factors do you think will impact the Indian stock market?

How fast the economic activity resumes, what is the pass on the effect of lower rates from RBI as banks start lending to initiate the credit expansion, lower crude and lower inflation bode well with bumper rabi output and expectations of better monsoon are among key factors to have an impact on the stock market.