Macquarie’s Sandeep Bhatia’s Tip To Get Past Market Uncertainty: Stick To The Leaders
A broad-based strategy right now would be difficult to pull off, according to Bhatia.
Investors should focus on large companies that are market leaders in their sectors as a broad-based recovery may still be out of sight due to the Covid-19 pandemic.
That’s according to Macquarie India’s Head Sandeep Bhatia, who sees larger stocks as a safer bet to tide over the pandemic uncertainty. “Larger names are better placed. The market will continue to focus on these names because there is a safety net and the earnings downside are the least in large caps,” he told BloombergQuint.
“The chips have to be recalibrated, or rather taken off the table completely, as far as small-to-mid cap stocks are concerned,” he said. “There are questions about sustainability there.”
If you have a market leading position then you’re better placed. But a whole broad-based midcap strategy will be difficult in this environment. Stick with the leaders in each segment, preferably large caps.Sandeep Bhatia, Country Head India, Macquarie Group
While that’s the theme that Bhatia expects will play out this year, he doesn’t necessarily think that it is sustainable for Indian markets in the longer-run. “I don't want the gap between large caps and mid- and small caps to expand because that dichotomy has already played out for a long period of time,” he said.
“If India has to do well structurally, then broad-based growth is necessary. Do I see that happening this year? No. Is that required? Yes.”
Bhatia also suggested that investors focus on India’s domestic consumption potential and not build their portfolio with an export-oriented outlook. Exports have taken a hit and recovery may take a while, he said.
Besides, India’s growth in the post-Covid world is likely to be driven by domestic demand. “The consumption story is what is driving markets. If consumption takes a hit in the post Covid world, we run out of an earnings growth stream.”
The Macquarie India head also said the market will move on from a record fall in GDP growth as the economy continues to open up and liquidity level remain high globally.
Watch the full conversation here: