ETMarkets Smart Talk: Irrespective of rate hike, invest in equities if you have a 5-year horizon: Pranit Arora

September turned out to be a volatile month for equities where 60,000 on Sensex acted as resistance while for Nifty50 18000 proved to be a big hurdle. How do you see markets moving in the festival month – October?
Both Nifty50 & Sensex saw major slanting resistance acting in their way to make a breakthrough and have now retracted to 17,200 levels after the US Fed rate hike.

Therefore, this extreme volatility can be anticipated to persist in the coming festive month as well. While few sectors can be seen directly benefiting from the pre-festive season which has already started in the form of Big Billion Days sale on E-Commerce platforms, the overall momentum shall also take into account the global scenario, which is currently recessionary.

Therefore, the festive season might work as a catalyst for future growth, but it will also require market sentiments to play in their favour then only it can succeed to overcome the hurdles.

How are you viewing gold in the festival season?
Gold has corrected significantly, especially after the rate hike measures undertaken by central banks to curb inflation. Even the gold futures fell to six month low of Rs 49,250 per 10 gram owing to the weak global outlook.

As the dollar index keeps on rising, gold is becoming less and less attractive for other currency holders amid high volatility in equity markets.
Therefore, for the upcoming festive season, the same volatility can be expected to continue along with $ 1600 as a danger zone.

If prices move below this level, then the next support may emerge at $1530 – 1550 levels. As a result, even though gold is seen as a safe haven during economic downturns, uncertainty levels are still very high.

Cabinet approved Production Linked Incentive (PLI) Scheme on ‘National programme on High Efficiency Solar PV Modules’. The government is stepping efforts to boost manufacturing. Do you see Industrials picking traction in near future?
The Government of India created the “Production Linked Incentive (PLI)” scheme to increase cost competitiveness in sectors facing tough competition from other manufacturing economies by acting quickly and learning from other nations’ industrial success models.

One programme on high-efficiency solar PV modules is also part of the scheme’s recent adjustments, which, given the need for more sustainability, seems evidently futuristic.

According to the government, the solar PV manufacturers who would benefit from the PLI plan will be chosen in a transparent selection procedure.

Further, an estimated 65,000 MW per year of completely and partially integrated solar PV module production capacity would be installed.

Therefore, we do expect the industrials to pick up traction in the near future as more & more investment takes place in a strategic manner.

Many of the large Indian corporates are investing heavily in alternative energy sources including solar energy. These might end among the beneficiaries of the PLI Scheme.

How do you see hotel and travel industry sector doing? Do you see traction building up in this space? Any top stocks which are on your list?
The hotel and travel industry has been making up for prior losses brought on by Covid. The sector has not yet reached its pre-Covid levels.

If one remembers, the hotel industry was one of the top losers during Covid-19, practically all hotel stocks were offered at steep discounts.

That’s why the recent rally that we all witnessed is therefore supported by the revenge rebound, which sparked an unexpected uptick in global travel and tourism.

and Lemon Tree were two of the top options in this industry that prospered during this surge. Both equities are fundamentally good and have seen upward momentum in recent months.

While looking ahead, it is predicted that the occupancy rate will increase moving forward, reaching 68% in FY23. Therefore, if the future prospects play out in favour, the Hotel industry can offer lucrative investment opportunities.

As the interest rate is likely to rise – what should be the right portfolio mix for investors who are looking to remain invested for say 5 years?
The interest rates that are likely to rise in near future will probably not have a prolonged effect. These hikes are temporary in nature, as they are undertaken to regain control over inflation & tackle global recessionary pressures.

Therefore, long-term investors need not worry about the same and can create an equity portfolio of best-performing stocks in any sector having sound prospects & growth potential going forward.

One such sector that investors can explore is the Automobile sector which has given a multiyear breakout in July 2022 this year. Even the associated sectors such automotive, tyre & semi-conductor sector seems well placed.

Irrespective of other factors at play, investment in an equity portfolio chosen based on research is likely to give the highest returns among all asset classes. So, for a five-year horizon, an equity portfolio is what investors must hold on to.

What is your take on the small & midcap space which has managed to buck the trend? What should be the ideal portfolio mix for small & midcap space?
The mid and smallcap space was more impacted than large caps during the pandemic. However, with the waning of the pandemic, they have been able to recover faster than large caps, delivering outperformance.

This was also aided by the drop in crude prices, and raw material prices which added to the margins of mid and small-cap companies in the last quarter.

There is no definitive answer to the second part of the question. Allocation to small and mid-cap stocks is determined by an individual’s risk-taking ability, the time horizon for investment, and prior experience of investing in different asset classes.

Having said that, mid and small-cap stocks need to be part of everyone’s portfolio, though in different ratios.

Small and mid-cap stocks have the ability to generate higher returns as they can scale much faster than their large cap counterparts.

In a well-balanced portfolio, at different times, either large, mid, or small caps perform better than the others generating a higher return for the overall portfolio.

Any stocks which are a play on the CAPEX cycle for long-term investors who plan to hold the stocks for about 5 years?


Energy stocks or EVs stocks.

Investors can consider holding Energy stocks which have lately been gaining traction. As capex plans in this industry are already being implemented, results will begin to emerge in the long run.

Investors looking to leverage growth stocks with solid Capex plans and a long-term perspective of three to five years may therefore want to examine energy stocks.

Another industry, which has enormous and sustainable potential, is EVs, which have not yet reached their full potential.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)