How to beat stock market volatility? Bet on these sectors to pocket gains in current share market scenario

The best way to beat stock market volatility is to invest systematically through SIP in the market,  V Srivatsa, Executive VP & Fund Manager – Equity, UTI AMC, said. In an interview with Surbhi Jain of FinancialExpress.com, Srivatsa said whenever the markets have traded below long-term averages on account of either liquidity issues, investors should allocate more money to equities. Investors looking for investment opportunities in the current market scenario may look at private sector bank stocks. Srivatsa remains positive on automobiles as valuations seem reasonable from a long term perspective. He is also overweight on real estate stocks given that the sector is coming out of a ten-year downcycle. Here are the edited excerpts from the interview.

Also read: India’s share market in 75 years of Independence: Milestones in transformation of stock market

1. What is your outlook on the current market scenario? 

Markets are at interesting crossroads as we will have the first year of normalisation after two years of covid induced disruptions which impacted both demand and margins across sectors and at the same time high inflation globally and rate hikes by developed markets and India is putting pressure on the valuations. We do expect the demand to be resilient given the pent-up demand across discretionary sectors and initiatives taken by the government in the last couple of years. We believe that given the high probability of recession in global economies, there will be softening of prices across all commodities ranging from crude, food and base metals some of this is already visible in the last couple of months. Hence, we could be seeing stability of earnings in a couple of quarters and coupled with reasonable valuations, this could set the tone for good performance of equity markets. However, we do need to be watchful of global liquidity given the rate hikes and decent probability of recession in developed economies. 

Also Read: Share market headed for correction soon, Nifty may slip to 15600 by year-end: BoFA Securities

2. What would you suggest investors do to navigate the market volatility?

It has been proved over the years that the best way to beat volatility is to invest systematically through SIP in the market. Also, whenever the markets have traded below long-term averages on account of either liquidity issues, investors should allocate more money to equities.

3. Currently, where do you see emerging investment opportunities?

We are positive on the domestic demand recovery and are overweight on the sectors exposed to domestic recovery. Our biggest weight and decent active weight is financials especially banks as we see credit growth coming back after a lull of two years and also with credit costs normalising in the upcycle we could be looking at higher ROA for the banks and given the growth coupled with reasonable valuations. We see value in the private sector banking stocks. We remain positive on automobiles as we see demand coming back strongly and valuations are reasonable from a long term perspective. We are also overweight on real estate given we are coming out of a ten-year downcycle and we expect the upcycle to last for two to three years.

4. How has been the performance of UTI Core Equity & UTI Healthcare Fund?

The performance of UTI core equity fund has improved over the last couple of years as this is managed with value orientation and value as a theme has done well in the last couple of years. The fund has focussed on a both top down and bottom-up strategy with focus on sectors trading at value from relative basis along focus on mid cap and small cap stocks with growth orientation. 

The UTI healthcare fund has underperformed the benchmark on one year basis as some of our bets in mid and small cap generics have not fared well and we were underweight on some of the large cap generics which has outperformed.  The fund is invested across all the sub segments of Indian healthcare space ranging from domestic pharma, US generics, hospitals, diagnostics and medical equipment and remains a good proxy on the long-term growth of the Indian healthcare sector.

5. What are the key triggers and drivers of stock markets going ahead?

On a macro basis, the trajectory of inflation is very important as the market is building in some recovery in margins across sectors impacted by high inflation.  As of now, Inflation has not impacted demand and markets are assuming stable demand, however persistent inflation can impact demand over the medium term. Hence the trajectory of inflation is very important. The stability of global markets is also very important as we have strong linkages with the global equity markets. The earnings growth pick-up in the second half is an important event to be watched out for.

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