Dhiraj Agarwal of Ambit Investment sees these key risks to the market rally

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Dhiraj Agarwal, Managing Director of Ambit Investment Managers says there are two key risks to the market rally right now: slowdown in sales growth which puts corporate earnings growth estimates for the current financial year at risk, and strong signs of revival in China, which could pull foreign investments away.

The delay in interest rate cuts by the US Federal Reserve, likely until end of the current calendar year or even 2025, will also weigh on sentiment.

Agarwal also shared his views on various sectors that have been in the limelight recently.

The fast moving consumer goods (FMCG) space, he says, suffers at this point of time from slower demand, and although the valuations have come off in the last two years, he still does not find them cheap.

On May 7, the Nifty FMCG index clocked its biggest single-day gain since July 2022 with 12 out of the 15 index constituents trading in the green.

Infrastructure is the dominant theme in the market now. “Whole capex and infrastructure theme, I think, will continue if the current government comes back. There will be policy consistency in terms of encouraging infrastructure investments,” he noted, adding that within the sector investors will need to assess the quality and valuations of individual stocks before making an investment decision.

The strength in real estate is also likely to continue for a few more years particularly with the healthy demand seen in the upper end of the market.

The cement sector has a few challenges. He pointed out that in the early part of the optimism around real estate, many investors preferred to play through cement rather than the actual infrastructure or real estate companies due to certain uncertainties.

But now they have started moving towards the primary segments such as real estate, infrastructure, or capital companies, instead of secondary market like cement.

“It’s possible that the entire infrastructure and real estate growth could have been priced into cement a little bit earlier as compared to the other sectors.”

Zomato is among one of his preferred stock picks as the company has a long runway of growth with even the grocery business Blinkit is showing signs of strength. There could be some consolidation but over the next 5-7 years, it could deliver superior returns.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow