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  • Nilesh Shah

    MD, Kotak AMC
    Shah has over 25 years of experience in capital markets. He has managed funds across equity, fixed income securities and real estate. He has studied at the Institute of Chartered Accountants of India. Shah has also co-authored a book - 'A Direct Take'. His dream is to go backpacking with his better half some day.

75% of top 1,000 stocks down 30%; there may be opportunity for you

Effects of the market meltdown during the Sept-Oct period are still visible.

Updated: Dec 13, 2018, 12.43 PM IST
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I believe we may be witnessing the ‘telecom’ moment for our finance industry.
The domestic equity market has bounced back strongly. In fact, the rebound has been better than expected by many market watchers. From October 26, Nifty rose by around 8.4 per cent till the end of November. This bounceback was on account of a major change in direction of the global economy. More specifically, a sharp fall in Brent crude oil prices put domestic bulls in charge of the market.

Within a month’s time-frame, Brent crude prices fell from $85 per barrel to $59 – nearly a 30 per cent decline. On an annualised basis, if prices sustain at these levels, then India would end up saving around $21 billion (annualised) in oil import cost alone. The fall in crude oil price will reduce the pressure on the import bill and bring down the inflationary pressure in the economy.

Having said that, effects of the market meltdown during the Sept-Oct period are still visible. Especially in the midcap and the smallcap segments. Of the top 1,000 stocks (ranked as per the market cap), nearly 75 per cent have posted negative returns on a one-year basis. More than one-third of the stocks on this list have fallen by more than 30 per cent year on year. So, while Nifty levels may indicate buoyancy, ample value opportunities may have been created in the smallcap and midcap segments due to the Sept-Oct correction.

For the debt market, the fall in crude prices has brought down inflation expectations. This has helped improve market sentiment. The 10-year gilt has fallen from 7.85 per cent to 7.61 per cent –a fall of 23 bps. Having said that, while optimism is rising, one may still need to be cautious in approach to allocation in duration. This mood prevails due to political uncertainty. There are concerns that state elections and the subsequent general election may fuel populism and put pressure on government finances.

RBI’s monetary policy stance may be reflecting this view. On one hand, while inflation has moderated, expectation of fiscal slippages and global volatility seems to be playing on RBI’s mind. In this backdrop, we believe we may be in for a long rate pause, going ahead.

Game is changing in product distribution
From the channel partners’ perspective, opportunities and challenges are balanced fairly well at this juncture. On one hand, we have growing investor acceptance and maturity, and on the other, we have cost competition. The game is now increasingly shifting towards overall portfolio return rather than facilitating transactions. This game will reward all and sundry who are ambitious towards new customer acquisition, can deliver personalised service and can be innovative in managing costs.

I believe we may be witnessing the ‘telecom’ moment for our finance industry. By that I mean basic banking, investments and insurance may be exponentially accessible to all at faster, easier and cheaper ways. For one, the Jandhan-Aadhar-Mobile has drastically changed the nature of financial transactions.

I think, for the financial services sector to spread faster, it will have to speak the language of the rural masses. Perhaps an HUL approach to rural India may be needed in the finance sector to solve the problem of the last man/woman. And to quite a lot of extent, this has already begun to happen.

On a side note, we recently organised and concluded a major IFA meet called – the Equity Colloquium. Among much deliberation, there was a distinct learning that process-led funds would trump over individual ability in generating wealth over the long run. This IFA meet brought in knowledge creators and knowledge seekers together in the same room. We have received well-rounded praise for our efforts to reduce the distance between fund managers and channel partners. Rest assured our endeavour to create and improve similar platforms would only increase over time.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of
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