Markets may not rebound in the near term; holding cash could be a prudent strategy: Ravi Singh of Religare Broking | Stock Market News

Expert view on markets: Ravi Singh, Senior Vice President of Retail Research at Religare Broking, believes weak quarterly earnings and tariff risks are the key headwinds for the market, and the Indian stock market may not rebound anytime soon. In an interview with Mint, Singh said he is positive about the IT and banking sector and believes they may lead the next leg of a rally in the market. Here is an edited excerpt of the interview:

Is the Indian stock market ripe for a rebound, or do you expect a prolonged bearish phase?

The Nifty 50 index has corrected 4153 points, or 15.80 per cent, from its all-time high of 26,277 on September 27. The MSCI India index is trading at a PE ratio of 21 times, making it an attractive entry point for building a position.

However, certain factors, like FII’s heavy selloff in equity markets, are testing this. Corporate earnings have also been underwhelming over the last three quarters, with earnings estimates consistently being downgraded.

To make matters worse, potential tariff risks from the US administration are causing fears of weakening consumer demand. So, considering these factors, valuations could further decline in the near term.

How can retail investors navigate this market downtrend? Should they buy now or protect cash?

The fear of weakening consumer demand and potential tariff threats, particularly from the United States, led to a worldwide market slump.

Furthermore, the decline in sectors such as banking and IT, which had previously shown resilience, has deepened the negative sentiment.

Considering these factors, holding cash could be a more prudent strategy in the near term, providing greater flexibility to navigate potential market volatility.

Which sectors could lead the next leg of a rally? What makes you think so?

Given the current market scenario, overall market sentiment remains weak, and selling pressure is present in almost all sectors.

Indian Indices have fallen for the fifth consecutive month, marking a record selling level in the last 29 years.

Looking ahead, we can take a long position in the IT and banking sectors for the next leg of the rally.

Both sectors are looking to lead the next leg due to their recent performance in Q3 and their price level. The banking sector stands to benefit from the positive outcome of the Budget for FY26.

Also, the RBI has eased the norms for loan requirements after three years, which signifies more strength in financial sector stocks.

Some financial stocks have seen healthy gains in February. What are your favourite picks from the sector?

Stocks like Cholamandalam Investment and Finance Company, Shriram Finance and Mahindra & Mahindra Financial Services experienced significant declines from their peak prices.

Additionally, in November 2023, RBI imposed tightening measures to increase risk weight on bank loans to NBFCs.

This added further pressure on the stocks. However, RBI has now reversed its tightening measure, which took effect on April 1.

Reducing risk weights will lower funding costs for NBFCs, as banks can allocate capital more efficiently. This move is anticipated to enhance credit flow to the sector, supporting business expansion and growth.

At their current market prices, these stocks appear attractive. Relaxing risk weights on bank lending to NBFCs is likely to boost investor sentiment, which could result in strong performance from these shares.

What should be our strategy for IT? Should we look beyond Infosys, TCS and HCL Tech?

Given the current market volatility and uncertainty, we should only focus on high-quality IT stocks.

TCS, Infosys, and HCL Tech are blue-chip stocks currently trading at good valuations.

We can accumulate these stocks in a pyramid formula for better returns in the future.

Looking beyond these key stocks can be riskier for now. So, one should align with the best-quality stocks for now and wait for good returns in the long term.

Do you see value in FMCG? With the government’s focus on increasing consumption and RBI rate cuts, how should we play this theme?

The consumption sector has been undervalued for a while but is now well-positioned for revival.

The revision in tax slabs and RBI’s rate cut are expected to boost disposable income, potentially driving volume growth.

Lower demand was not the only challenge FMCG companies faced; they also faced high food inflation that peaked in November.

With inflationary pressure now easing, margins are likely to improve.

FMCG stocks like Nestle are well positioned to gain from this, and at the current price, they present an attractive investment opportunity.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.