"The markets have indeed turned around and are once again testing previous highs. However, we believe that there can be intermittent slides based on global macro scenarios," Ram Kalyan Medury of Jama Wealth told Moneycontrol in an interview.
With 23 years of experience in technology and financial services, the Founder-CEO of Jama Wealth believes that the long term India story is not just intact, but has become stronger. The boring mantra continues to be “stay invested”, he advised.
Ram, former CIO of the ICICI Group and former Group CIO of Poonawalla Fincorp, feels that the pandemic's impact is now down to statistical analysis, but a fresh wave with a deadlier effect can derail everything. Edited excerpts:
Do you think it is the right time to start betting on domestic cyclical sectors on expectations of strong economic recovery ahead?
We are seeing good traction in some sectors such as chemicals and manufacturing in the Indian industry. The expectations are buoyant about a strong economic recovery ahead. While we would not term it betting as such, we feel this is a good time to look at strong performers in specific sectors such as the ones we mentioned, and take a long term position in them.
Do you expect the current risk-on sentiments to continue in the coming days despite the uncertain global environment?
With a lot of bad news factored in, and a few positive developments, the risk-on sentiment has reduced a bit. The markets moved up over the last quarter and gave investors reasons to smile.
The Ukraine-Russia war is no longer grabbing headlines, with investors more concerned about commodity prices and interest rates, rather than the end of the war.
Do we still need to worry about inflation concerns and policy tightening by global central banks?
We are clearly not out of the woods. The Russia Ukraine war has not ended and may even take a turn for the worse. While Fed interest rates are now factored in, the expectation that rate hikes will moderate may not materialise as inflation continues to be high and negative surprises can have a global impact.
Covid continues, but it looks like its impact is now down to statistical analysis, but a fresh wave with a deadlier impact can derail everything.
Do you think Indian markets' uptrend is still capped due to likely recession fears in western nations?
The markets have indeed turned around and are once again testing previous highs. However, we believe that there can be intermittent slides based on global macro scenarios. The long term India story not just remains intact, but has become stronger. The boring mantra continues to be “stay invested”.
Are you bullish on the cement space because of the expected growth in infrastructure and real estate space?
Most of the cement stocks are still down by 20 percent to 40 percent from their peaks. This is a cyclical sector and one has to be careful about entering the sector at the right time. While the long term outlook in infrastructure in India is positive, the sector's headwinds and tailwinds need to be analysed closely.
As of now we can see that the cost pressures are reducing with the decline in raw material costs such as pet-coke and crude oil. Seasonality wise, the second quarter is a weak quarter, but these trends have buffeted their stock prices. However the trend in these commodity prices is linked to global macros and may turn swiftly.
Do you think the rally in the IT space is unlikely henceforth?
The IT space, is undergoing some headwinds in terms of wage pressure and consequently growth in earnings. This is notable among the majors, where we have also seen attrition rates climb to levels much higher, than where they were a year ago.
Investors must be cautious about the larger companies given these trends. However, some smaller and agile companies with niche specialisations in areas like Cloud, Internet of Things, Embedded System, Testing services could still do well, because they might be less vulnerable to budget cuts compared to the larger players.