Stock Market Correction Likely In February-March, Says Renaissance Investment’s Pankaj Murarka

The year 2020 was about lockdowns and fatalities but 2021 will be about reopening of global economies and vaccination, according to Pankaj Murarka. But before investors can make further gains from the bull cycle, a correction is imminent.

“In my mind a correction looks quite a possible event that could play out probably in later February or March,” the chief investment officer of Renaissance Investment Managers told BloombergQuint’s Niraj Shah in an interview. Indian indices, like other global markets, have shown a return of over 80% since the lows of March. It’s only natural that investors will book these profits. “People will want to take money off the table because returns that the market have delivered or the risk markets have delivered are extraordinary,” he said.

Renaissance Investment Managers itself is selling some of its investments to prepare for the pull back. The investment firm will keep 10% of its funds in cash, Murarka said.

While Indian equity overall is set for a new and “enduring” bull run, there are certain pockets of the market which have “froth” if not a bubble, he said, talking about stretched valuations. He suggest that investors take a stock-specific approach and book gains in some of the high-growth companies which have performed above and beyond their fundamentals.

On the other hand, some volatility can be digested for the good quality companies which have a long, 5-15 year structural growth story, he said.

“If you look from an India perspective, if you get the winners right and the company actually delivers growth, valuations will take care of themselves despite being expensive.”

Here’s what Murarka had to say about various sectors:

• Information technology will stand out. This quarter will probably be the strongest third quarter they have had in a decade because of a low base in the last year and accelerated deals.
• Healthcare companies should continue to do well.
• Demand resurgence in most sectors is quite surprising, specially automobiles.
• Automobile will see a very strong demand uptick for the next 2-3 years.
• Demand resurgence may not completely reflect in this quarter but will show up in coming few quarters.
• Company has ownership in mid cap IT as well, apart from the large caps, and there are some firms (to invest) argument is very compelling, especially with the push in digitisation.
• Smaller IT companies will also benefit.
• India likely to hit double-digit growth by 2024 once schemes like PLI (performance-linked incentives) gain traction.
• Very positive on all staple sectors related to the core of the economy.
• China’s strategy of restocking commodity inventories has partially led to resurgence of demand and price recovery
• If demand sustains, which is likely, we could be in for a commodity cycle. But it's too early to call that.
• Will stick to market leaders or integrated players in commodity segment.
• Have studied cryptocurrency over the last year and am now a believer of Bitcoin.
• Bitcoin has arrived as an asset class, especially in the U.S.

Watch the full conversation here: