Making Sense Of The Stock Market Volatility: In Conversation With Sushil Kedia

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Speaking to Swarajya, Sushil Kedia, one of the leading stock market figures in India, elaborated on the ongoing volatility in the stock markets and what it implied for India’s long-term growth objectives.

How long do you expect the current market volatility to last?

Volatility is the cost of bearing uncertainty. With the war stretching and macro adjustments of an out of hand inflation resulting in negative real rates persisting so far, volatility is here to stay for a while more.

Is there a possibility of a steep decline in the short/medium term? Or are the possible negatives priced in by the market?

With markets having first digested a worldwide pandemic and then munching in war-worries and dribbling around the macro adjustments, we’ve had a fair amount of climbing the walls of worry displayed. Markets seem to have digested the negativity quite fairly and squarely.

Should participants wait for some time before increasing their exposure to the market?

There are many markets within any single market. The hallmark of this super-bull move from panic of March 2020 is continued sector rotations. With so many political and economic uncertainties playing musical chairs, there are new, fairly valued opportunities rotating around.

Which sectors are you bullish on? The markets have recently been bearish on the HDFC twins. Do you expect them to continue falling further?

HDFC Twins seem to have over-done the re-balancing act of a supposed global investing index driving institutional investors head over heels in their selling.

At this point, cement clearly is a winning sector. With inflation likely to persist, I would selectively bet on a number of FMCGs who are best positioned to pass on inflation. More than sweeping sector moves, the market has reached a phase of valuations where the juicier opportunities are stock-specific, and at any given point of time, one or two stocks in almost every other sector become attractive to invest in, due to rotations.

How would you expect crude prices to shape up in the near term? Any possibility of a decline in prices?

The peak at the beginning of the war seems to remain the peak. Though a fairly good 30 per cent decline came equally fast, but this decline seems like phase one of a correction. Some undulations in Nymex Light crude between the $92 low going back into a rally to as much as $115-117 will consume some time, and then eventually, a big decline towards $65 may come.

How do you expect the S&P 500 to perform over the next few weeks?

The adrenalin rush to predict and short term is common. This should be done only by those who can turn-coat and dump positions if markets start behaving the other way. Traders have a name for it, stop loss. So with some stop loss, as of now, it appears most aren’t expecting a New All Time High in May 2022 to come and that’s what we are betting on.

Over the longer term, do you expect the uptrend in the Indian markets to remain intact?

With never-ending money supply growth, inflation and rising population, equities as an asset class is one unique asset where profitable companies are re-investing their earnings into growth. Unless all of these variables vanish together, there is a permanent bull market in stocks.

In recent months you have talked about social media (SM) influencers who misuse SM to misguide retail investors. Given the difficulties in regulating SM, how do you think these issues can be tackled by regulators?

Where there is a will, there is a way! This couldn’t be truer for the king! If there is a will, a simple regulation can be made that only registered analysts/advisors/portfolio managers can communicate on stocks, securities and markets on any public forum, and there be guidelines for performance measurement and communication along with disclosures.

Any unregistered entities still playing social media truants can simply be muzzled by instructions to social media platforms to ban these accounts. I am sure you are aware, for example, that Twitter doesn’t permit advertising investment or trading services. So if their software can prevent the advertising of these products, it can prevent unregistered players too, easily.

What are your thoughts on crypto investments, especially after the budget announcement and given how the young investors are being lured into it?

Your question has the answer. Anything to which innocent people are lured with structured cabals is suspect. The various measures by the Government of India, including taxation strictures, clearly have indicated cryptos are not appreciated.

If in a democracy, people vest the power to govern on an elected government and people vest the power to create money to this elected government, any fool trying to take on governments around the world in creating parallel money is walking up an alley that has no light on the other end.

What is your take on investments in gold, given the market volatility?

Gold is the most manipulated asset class in the world. Ever since the Bretton Woods pact fell apart and Central Banks could embrace profligacy of printing infinite amounts of cash without any backing of gold, it has become imperative for the survival of many central banks that gold be kept suppressed.

This long term artificial but mighty downward pressure on the pricing of gold on the one hand and the short term quagmire of negative real interest rates on the US Dollar creates a volatile trading zone for gold in the near term.

This band, as per my technical analysis, could stretch gold in the extreme to as much as $2,100 and on the downside to $1,700. But, I carefully chose the term trading band between 1700-2100, and that clearly implies I do not see possibilities of central banks willing to release their leash on gold price manipulation, what with the impending gargantuan downsizing of the US FED balance sheet around the corner.

Also Read: Is Value Investing In India Finally Back From The Dead? In 2021, Value Stocks Outperformed Growth Stocks by 139 Basis Points