Market Outlook 2022: Invest in companies that are willing to pass on cost to consumers, as inflation stares: Expert

Low interest rate regime and high inflation have triggered the stock market slide, expert Anand Tandon tells Zee Business Managing Editor Anil Singhvi in an exclusive interview.  

He said that the interest rates were low and inflation benign till some time ago. The inflation is back with serious upside, he further said. It was being said that the status quo on interest rates could remain over the next six months with the continuation of buyback. 

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The view that interest rates will be changed just once has now completely 'changed' Tandon said. The view now is that tapering of bond buying could end by March 2022 with increase in interest rates at least thrice in the year. 

These readjustments are having an impact in the emerging markets including India, he said.  

He said that the valuations in many of the companies, which have been listed recently in India, are bound to see correction in valuations, going forward. The valuations of these business have been high and hence are seeing corrections. 

On trends of the Foreign Institutional Investors (FIIs) being sellers of the India equities, Tandon said FIIs is pool, which has different elements including Sovereign Wealth Funds, small portfolio managers and hedge funds and each may have a different view. The figures that are reflected suggest a consolidate figure, he clarified.  

The hedge funds are impacted sooner, while the long-term Sovereign funds are not impacted at all, so it is difficult to explain an overall view of the FIIs at any point, he pointed out.   

The interest rate hike in US could see some rewinding from speculative traders, though it is difficult to guess up to how long, Tandon said.  

If the fall is swift then the valuation could go down significantly in India and then a further fall could be less likely, he added. He said that Indian equities are trading at a premium. 

He said every market fall should be seen as an opportunity by investors to increase allocation in equities. This does not apply for the traders, he warned adding that trader must go with the markets.  

This is a time for increasing weightage in equity portfolio, he advised.  

The next year could see a further spike in inflation and companies will either have to pass on the prices or compromise on margins.  

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Investors must invest in sectors where the companies will be able to pass on the price to the consumers, he suggested. He said that the technology, banking and Fast-Moving Consumer Goods (FMCG) segments are some viable options for investors.