Investors have been a bit confused whether to stay on the sidelines or make investments, as the market has been indecisive since mid-February. Sandeep Bhardwaj, CEO of Retail Broking, IIFL Securities, told BusinessLine that investors should adopt a bottom-up approach to identify ‘quality’ stocks, as the benchmarks are at elevated levels. He also talks about what investors in Karvy should do in case their holdings are still stuck, and other important factors that would affect the market. Edited excerpts:

Are you able to convert all Karvy accounts into IIFL Securities?

(Since) the day since we won the competitive bid to acquire 11 lakh demat accounts held by Karvy, we have been receiving a very positive response from Karvy’s clients and a huge pool of requests for account activation and investments. With our simple and STP on-boarding journey, Karvy clients are able to activate their trading and demat accounts in less than a minute and start investing or trading in their old holdings, which were stuck at Karvy for over a year. We have offered our exclusive research and portfolio restructuring services and cutting-edge technology platforms like IIFL Markets App and Trader Terminal to accelerate this process.

What should old Karvy investors do in case their holding is still stuck?

If the client’s holding is in his/her DP account, the same can be unlocked within a minute by giving consent to IIFL Securities. Already, thousands of customers have reached out to us and activated their accounts for investing and trading. Investors can reach us through https://wecarekarvy.indiainfoline.com.

After acquiring 11 lakh Karvy accounts, what is the exact asset size of IIFL?

The Karvy acquisition has helped us to increase our assets under management and advice significantly. Post acquisition, we are now managing over ₹2.64-lakh crore of assets under management.

What is your take on the market? Do you think the best is over, at least for now?

At 21.5x 12-month forward PE, Nifty index valuations are near 15-year high on fairly optimistic growth estimates for FY22. While elevated valuations could cap the benchmark index returns in the near term, select stocks could outperform the market driven by visibility of strong earnings growth.

A bottom-up approach in stock selection should be preferred in the current conditions, in our view. As the index has been trading in a higher top, higher bottom chart structure since the last one year, 13,600 level which is the higher low formed around the Union Budget 2021, will act as a crucial support level for the index in the short term.

What could scare bulls going forward and what could be the next trigger for the market to go up?

Higher commodity prices and unwinding of some of the cost savings due to normalisation of economic activity could weigh on margins in the near term. Also, rising bond yields and a surge in Covid-19 cases could bring short-term volatility. However, continued spending by the US government and gradual rise in inflation could rerate economy-facing value stocks.

As the Q4FY 21 earnings are expected to show positive momentum, we expect the index to form a strong base around the mentioned level and restart its northbound journey. In terms of stocks, the mid- and small-cap stocks are more domestically exposed compared to large-caps and hence, the expected recovery in domestic demand in the near to medium term should support the performance of mid- and small-cap stocks.

Actually, the pandemic has advanced the complete digitisation process of the workplace, which we were expecting in the coming three to five years and that is the reason most of the workplaces will continue to operate from home post pandemic also. The same is reflected in market turnover and trading clients also. So yes, we do expect the trend to continue. This is coupled with many other factors like falling benchmark yields over the last one year, which have made equity an asset of choice for retail investors.

Your advice to retail investors... book profits or buy even at this juncture?

Retail investors should keep buying in a staggered manner as the Indian economy is already showing signs of an uptick. We are expecting a continued uptick in the corporate earnings along with benign liquidity, which can fuel the market momentum, going forward. We also advise investors to have a well-diversified portfolio with the right mix of equity, debt, gold and other asset classes. In case the volatility persists for a while a diversified portfolio with help preserve wealth.

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