Holistic and global, inflation is not a domestic, but a global concern. We saw commodity prices rise from sector to sector. It was with metals first and then it shifted to energy and oil prices hit 5 to 7 year highs. It’s a global concern, says Rahul Shah, VP Equity Advisor, Motilal Oswal Financial Services.
The past week has been headed by many broader market names. Many of the high momentum stocks also corrected quite massively!
There has been a lot of volatility over the past week. The clear winners were the PSU banks, which did very well, and many IT companies reported their numbers. Some of the numbers were missed and we saw some sales. It was the same with the FMCG package. Going forward, it’s important to pay attention to when the wholesale bankers release their numbers next week, and so do many nifty companies. It should be important to follow the next week from here.
We saw the IPO market warm up. But how are the companies that have seen the recent IPOs? Do you see the momentum continuing?
We have seen many new IPOs in the past few months. One of these is obviously the imagination in the markets and many IPOs are fully valued upon entering the market only because of the way the markets were.
The stocks tend to do well during the listing gains and then they tend to give up most of it. Most important are the valuation metrics. Obviously, many stocks came up with in -propriate valuations. The markets punished them even after they were listed. A couple of IPOs are listed in November or later this month. One is Nykaa. We saw a spectacular listing of Zomato at the It-Tech rally.
There could also be good listing gains for Nykaa. It’s important to look at Nykaa ahead and, later, Paytm’s IPO, which could be the next big bang on the road. The third is Policybazaar. The market should look ahead from here and in the short term Nykaa should be the clear winner.
Many companies made most of their profits in the consumer goods sector. You were under cost pressure. How do you see the future of these companies? Can this continue in the next few quarters?
The senior executives of all majors like the one that released their numbers mentioned that this was the fastest inflation they had seen in the past four decades and that this type of inflation hadn’t occurred in a quarter. This is important and worrying, and that is exactly what we saw in the stock price’s negative reaction. Similarly, we expected the same with the results from HUL or Nestles.
Obviously, inflation is rising and hitting most businesses. This has had an impact on both earnings and the most recently watched stock prices. Holistic and global, this inflation is not a domestic concern, but a global concern. We saw commodity prices rise from sector to sector. It was with metals first and then it shifted to energy and oil prices hit 5 to 7 year highs. It’s a global concern. Things should cool off in a few months or so. But we have to go through this kind of inflation for at least the next quarter or so. It’s more of a global thing. Domestically, things should be in sync with the global economy for the coming months.