Stock market outlook: 'Markets are likely to be challenged in next few quarters', says Manish Gunwani of Bandhan AMC

The BSE Sensex and Nifty50 saw a significant increase in trading activity on Friday after a sharp decline a day before. The BSE Sensex rose by more than 700 points, while Nifty50 climbed back up to 24,100. This positive movement in the benchmark indices marked a recovery from their steepest drop in nearly two months during the previous session, as traders adjusted their positions ahead of the monthly derivatives expiry.

With the exception of Nifty Realty, all sectoral indices opened on a positive note on Friday. Nifty Media led the way with a 2.1% increase, followed by Nifty Pharma and Healthcare with gains of nearly 1.5%. Other sectors such as Banking, Auto, Financials, IT, Consumer Durables, and Oil & Gas also saw increases of up to 0.5%. In contrast, Asian markets experienced declines, and the yen was on track for its strongest weekly performance in four months.

Business Today spoke to Manish Gunwani - Head of Equities, Bandhan AMC Limited on the future of the stock market.

1. What is your near-term outlook for the equity markets?

Over the last two months, the overall environment for Indian equities has deteriorated at the margin. Firstly, earnings have come in softer than expected for the second quarter in a row leading to downgrades across sectors. Together with punch valuations, this has led to some readjustment of expectations going into the second half of the year. Secondly, the victory of Mr Donald Trump as the US President-elect has dampened expectations on the US rate cut cycle given the view that his policies are likely to be more protectionist and inflationary leading to a strengthening dollar and consequently a weaker Rupee. While we remain optimistic about the long-term growth story that India offers, investors must brace themselves for higher volatility in the near term, given the growing uncertainties about global policies, geo-political issues, and lastly the current cyclical slowdown prevalent in India.

2. What are the major triggers for the market currently?

Markets are likely to be challenged over the next few quarters. Multiple reasons for this – historic returns have been high leading to valuations being stiff, lot of uncertainty globally regarding US economic policies given the resounding victory for Mr. Trump, corporate earnings in India turning weak with a slowdown in the economy past couple of months etc. We believe until the dollar starts weakening it will be difficult for the global and Indian markets to stabilize.

3. Which sectors present compelling investment opportunities, given India’s economic trajectory?

We believe that Financials continue to offer a reasonable risk-reward at the current juncture. Other than Financials, we remain constructive on Healthcare, Realty, and Mass Consumption plays.

4. Given the current market dynamics, what would be your advice to retail investors looking to invest in equity funds?

We believe that one needs to be realistic about prospective returns as equity markets go through cycles. One needs to look through short-term volatility and be disciplined in their asset allocation strategies to achieve their long-term financial goals.

5. What is your take on yellow metal and Silver which is also making headlines?

Most governments globally have incurred high amounts of debt and with real GDP growth being tepid aggressive monetary policies may be required to manage this debt level i.e. in many developed countries we may see negative real interest rates for quite some time going forward. From this perspective, precious metals look attractive.