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Udayan Mukherjee

Has the market trend reversed?

 

Questions Answered

Q

guest: How closely an investor should watch the infighting in BJP on account of economic performance of the country? Wud u just ignore such voices or Wud u find it prudent to listen to such voices as well for no surprises in the market eventually?

Udayan Mukherjee: Good morning Everyone, happy to be on MC again. It`s been a rough few days for the market, but that was coming. The debate about the economy is taking an ugly turn. That in itself, shouldn`t be a problem for the market. Politicians will do this, they have to out talk each other. The bigger issue is that the economy is faced with serious challenges. Initially, it appeared that demonetisation had been digested by the economy, but then came a poorly implemented GST. While these are not the central reasons for the economic downturn, they have certainly exacerbated it. The key takeaway for the market is that we may be staring at yet another year of pedestrian earnings growth. That, coupled with high valuations poses risks to stock prices and we should be aware of that.
Q

labani90: When will the market reverse? Is there any chance to recover the market here? As a short term investor should I sell all the holdings or hold for a bounce back.

Udayan Mukherjee: Short term calls are difficult at the best of times, but now near impossible given the volatile economic and global environment. The Nifty is currently dealing with its previous support level of 9700, where it bounced back from in the previous leg of correction. Lower levels are not inconceivable, given the earnings picture and the lack of liquidity support from global investors. You shouldn`t take a trading approach now. For the part of the portfolio that is earmarked for the long term, you can sit tight. For the part that you are worried about in the near term, you could take profits and sit out for a while. It is unlikely that the markets will run away from here in a hurry, on the upside.
Q

guest: Why so much of negative noise while Govt is on track to implement and​ address GST issue

Udayan Mukherjee: Yes, GST is being implemented but with too many glitches. Most small businesses and traders are unhappy with where things stand today. There are obvious faults in the way it has been implemented which need to be rectified immediately. So it is not just a matter of "getting used" to it. This will show up in the results of the current quarter and even in the oct-dec quarter. That is worrying the market, as it may mean that FY18 earnings will be much lower than envisaged earlier.
Q

guest: When market will be stable? Where is the maximum possibility to make money is large stock, midcap or small cap.

Udayan Mukherjee: I hope soon. The next 2-3 months look uncertain to me. There are too many factors moving around. Macro economic problems, crude prices rising, rupee slipping, earnings being sluggish and shrinking global liquidity. Against all this stands one factor : domestic money. Lets see where this tug of war eventually leads us. Midcaps look vulnerable in the near term. Earnings here will be badly affected by the economic environment, and valuations have expanded enormously over the last 8 months. So, over the longer term I still feel this is the best place to make money but in the near term you need to be careful.
Q

guest: Where is this market heading? Is the GDP growth going to affect the market?

Udayan Mukherjee: There is no one to one correlation between GDP and the stock market. Eventually though, if the GDP slowdown persists it will trickle down to earnings of listed stocks and that will hurt prices. I think this quarter`s GDP won`t be great either. There are hopes of a bounce back but I am not so sure. For the health of the market, we do need to get back to a 7.5% kind of run rate for the economy soon.
Q

audhesh63: at the end of this government term of 5 years will nifty and currency will be below level from where Modi has taken charge?Is this not looking reality now that its turning out to be 5 years of failed governance.

Udayan Mukherjee: We still have one and a half years left, lets see where things stand then. This government has not been inactive like the previous one. It has tried many things which are intended to be structural in nature. Implementation has been an issue, and that has caused pain, particularly to the informal economy. Calling it "failed governance" may be too harsh, but I agree that the government needs to pull back things in the next 18 months on the economic front. I hope it is thinking along the right lines.
Q

TILALLCH: Sir, Which sector are you bullish for a period of 1 year to 2 years time period ?

Udayan Mukherjee: 1 year outlook is hazy. For 2-3 years the following themes : financialisation of domestic savings, select consumer (non fmcg), retail, chemicals, alternative fuels. Not keen on PSU banks, IT, telecom. Goodbye for now. Dussehra greetings t all of you. Hope to catch up again before Diwali. Till then.
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