Good time to bet on recovering economy plays: Ajay Bagga

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It has been reported that the Paytm NSE 17.24 % was a sentimental hitch, but we have seen good buying coming into Paytm on Tuesday. Overall, it has been a great year for marketmen. People would be looking at taking some money off the table.

Over the last four to five days, we have seen a 5% correction. Remember that even then, in November we are not that much down because we had gains in the beginning of November.

I would consider that the money is coming back in the primary markets so those numbers are not gazing at the actual reality because the IPO market has been red hot and there are flows from FIIs which are not counted there yet, the company said.

$15 Billion Getting Reduced Every Month

The third part is globally, there is continuity. Jerome Powell getting reappointed was welcomed by markets. The markets are factoring in a June or an August kind of a first rate hike by the Fed in 2022 and that had led to some amount of a selloff.

That is a bigger issue but if taper continues at this rate of $15 billion getting reduced every month through June, we would still be getting $400 billion more being invested into the US market.

“We expect Powell will not be in a rush to undo the good work already done. Inflation is a problem and the political class also is worried on inflation, especially the gasoline inflation in the US”, says market expert Ajay Bagga.

We have seen Biden talking to China, Japan to release strategic reserves and OPEC plus has come with its own rejoinder that they would cut supplies further.

So an interesting battle is going on on that front but inflation is more a supply base and commodities based, both of which the US government has very little control on and both of which cannot be really damped down by a hike in interest rates.

81% Chance of A Rate Hike

I would say the central banks will not be in such a tearing rush to raise rates. If you look at the Fed fund OIS, the swap rates predict an 81% chance of a rate hike by September and a 92% chance by November.

Mostly the rate hike comes when you have a gross 90% in the market perception. That could change after this December’s Fed meet. We will have to see that but as of now, I do not see a rate hike at least before September next year, the company said.

What that means for us is that it will be domestic plays; liquidity will continue. I do not foresee RBI moving at least before March, if not later. I do not foresee the accommodative policy being changed except for liquidity.

They have been sponging off excess liquidity in the markets because banks are not able to lend and that liquidity which was sloshing around is being taken up by RBI on a weekly basis. So that will continue but I do not see any change in rates right now.

Disinvestment Process

Second, we spoke to about five investors post the repeal of farm laws. Nearly all were saying that it is a more of a political decision. The share of agriculture in the overall scheme of things for us or in the companies that we are looking at is not really making an impact.

If it impacts the disinvestment process and the fiscal space gets constrained, then it is a problem; but right now, the government is sitting in a good place where they have curtailed expenditure and the tax inflows have been very good, the company said.

Recovering Economy

So, they would still look at playing industrials, capital goods, financials, domestic cyclical and in a global scenario, the Indian technology is not overvalued unlike the product or the app-based technology in the US, which has been hurting and there are real revenues and real business models there. So even technology is being looked at right now. (The Economic Times)