Employees are reflected in a glass panel as they use desktop computers while monitoring data at a securities brokerage in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Selloff In Indian Equities May Last Until Year-End, Says Envision’s Nilesh Shah

The selloff in Indian equities is likely to continue for the rest of the year weighed down by weak earnings growth and outflows from emerging markets, according to Nilesh Shah, managing director and chief executive officer of Envision Capital.

“I believe 2018 has been a year of risk-off trade,” Shah told BloombergQuint in an interaction. “Earnings growth for corporate India and Indian equities has not been commensurate because of a combined effect of margin pressure and lower demand which led to a huge sell-off.”

The selloff, Shah said, may continue till the rest of the calendar year as foreign institutional investors are trying to cut down their exposure to emerging markets, including India.

Key highlights from the conversation:

India’s Macro Indicators

  • Headline macros are not that bad, especially subdued inflation, rate hikes may not happen to the extent it’s being discussed.
  • India’s liquidity challenges will last only in the short term.

Rising Commodity Prices

  • Trend to continue for the next few quarters and ease off later due to a stronger dollar and higher interest rates.
  • Greater margin expansion to be seen in financial year 2019-20 due to softer commodity prices.

Cable Operators Space

  • Cable operators and direct-to-home services space should be best avoided as uncertainty still looms large.
  • Long-term value investors must avoid a sector where risk of disruption is high.

IT Stocks

  • The information technology space has been a huge winner in this calendar year due to a strong dollar.
  • Majority of the managements said demand remained strong and their clients are willing to invest in newer technologies.
  • Mid-cap IT stocks look attractive due to cheaper valuations at present.

Watch the full conversation here: