Synopsis
A sharp market sell-off amid geopolitical tensions could provide selective buying opportunities in the long term, says Sunny Agrawal. He highlights robust order books, adjusted valuations and attractive prospects in private banks, consumer internet and some large-cap stocks, while noting that crude oil and inflation remain key macroeconomic variables for investors.
ETMarkets.comMarket corrections provide opportunities for long-term investors. Geopolitical concerns and oil prices are causing inventory declines. Sunny Agrawal of SBI Cap Securities sees panic selling. The strong correction of several values from the first line to the middle geopolitical tensions and rising crude oil prices could create selective opportunities for long-term investors, even as markets grapple with uncertainty around inflation, growth and global energy prices.
Speaking to ET Now, SBI Cap Securities’ Sunny Agrawal said the recent sell-off of several large-cap companies appears to be driven more by panic and worst-case assumptions than by a deterioration in company fundamentals.
One example is the response of companies with exposure to the Middle East, where investors are factoring in prolonged disruption to projects and economic activity. “There is absolute panic at the stock level because the company has 25-30% exposure to the Middle East, and the market is not taking into account that the entire order book, with 25-30% exposure, might not get executed in the next 6-24 months,” he said.
However, Agrawal believes that the market could extrapolate an extreme scenario. If geopolitical tensions ease in the coming months, investors may return to more normal assumptions about project turnarounds and business growth.
He noted that some companies’ underlying order pipeline remains strong despite recent volatility. “If we consider a very strong order book, close to Rs 4.3 trillion and within which the private sector contribution is also closer to 30%, which clearly indicates that even private sector investments are picking up,” he said.
With a sharp correction in valuations alongside the broader market, the risk-reward ratio for long-term investors is starting to improve. “Post the correction, valuations have even become comfortable…we believe the fair value of the company is closer to Rs 4,000-4,200. So, any dip right now is a good buying opportunity for a long-term investor,” Agrawal said.
In the consumer Internet sector too, increasing competition and temporary disruptions have weighed on confidence, but the overall growth scenario remains intact. “After the correction, even there we think the risk-reward becomes favorable. In fact, these two stocks, Eternal and Swiggy, look quite attractive as the long-term growth opportunities are quite intact,” he said.
At the macro level, crude oil remains the key variable in India’s economic outlook. High energy prices could trigger inflationary pressures across the economy if they persist for several months. “If crude continues to trade above $90 and in the 90-110 range for quite a long period of time, three to six months, it will definitely have an inflationary impact on the entire value chain, first for the manufacturer and then for the consumer,” Agrawal said.
Still, he noted that India has seen relatively low inflation over the past year, which could provide some protection if energy prices remain volatile.
In the banking sector, Agrawal said valuations have also become reasonable after the recent correction. “After the correction, now most of the private banks are trading at a fairly reasonable valuation,” he said, adding that a mix of well-diversified private and public sector banks could help investors navigate the current environment.
As markets digest geopolitical risks and commodity volatility, Agrawal believes the current panic phase could gradually give way to selective opportunities for investors willing to take a longer-term view.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. They do not represent the views of The Economic Times.)
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