With 10 per cent correction, valuations have become more comfortable: Edelweiss Securities

In the current volatile markets, it’s very difficult to predict/ forecast the outlook. However, I would certainly say that with 10 per cent correction, valuations have certainly become a lot more comfortable, not only at the aggregate level, but also across various stocks/ sectors.

Yes, the resilience of retail investors has been quite surprising in this cycle and has certainly been a cushion for equity markets in such adverse global environments. My advice would be that while equity markets do remain attractive from a 3-5 year perspective, it’s now more important to manage risk rather than chase returns. Also, value now lies in quality.

Howard Marks once said that Trees don’t grow to Sky. This analogy holds true for new-age stocks as well. The combination of low cost of capital and scarcity in public markets have turbocharged these companies. This frenzy is part of the normal markets cycle and we have seen such a frenzy across sectors over the years. However, unlike in the past, most of the new-age companies have a more resilient business model, and, hence, most of these companies do make sense at a certain valuation.

I don’t think so. In fact, this argument of the LIC IPO sucking out liquidity is a flawed one. IPOs/ QIPs have seldom hurt market sentiments in the past. In fact, if anything, it deepens the market and attracts interest. So, while the LIC IPO may to some extent weigh on other primary market listings, especially given the adverse macro environment, it’s unlikely to precipitate a crash. Also, increased LIC divestment is eventually going to be ploughed back into the economy through increased spending. Hence, to that extent, I would not be very worried about the LIC IPO.

I think the key monitorables for India Inc.’s performance would be demand. In the last two years, large corporates have seen a significant improvement in cash flow and balance sheet, but this is more due to cost rationalisation, rather than strong demand. Also, with respect to demand, large corporates have gained significant market share in recent years. However, it remains to be seen if that alone can drive demand. Hence, demand rather than commodity inflation will be more critical to monitor going ahead.

Well, apart from oil, I think the Fed’s policy reaction will also be criticalr. If the Fed turns more hawkish, it could result in increased volatility over the coming days.