Medium Term Trade On Nifty Will Have To Be On The Long Side: Amar Singh, Head - Advisory, Angel Broking
In an Interview with BW Businessworld, Amar Singh, Head - Advisory, Angel Broking, talks about equity markets, technology, trade and more
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How has the equity markets evolved over the past couple of years in terms of technology and trade execution through mobile application?
The big shift in the last couple of years has been the much greater acceptance of internet trading and app based trading in the Indian markets. Today if you look at the non-institutional volumes in the Indian markets, nearly 25% happens either through internet platform or through the app based mobile platforms. With the proliferation of smart phones, app based trading has become simpler. Also with brokers increasingly integrating their research and execution, “Call to action” has become the preferred mode of trading where the application offers a seamless access from research to executing the trading.
Is the retail segment comfortable using the mobile application for trades execution?
Interestingly, the retail segment has shown a tremendous affection for mobile applications as it gives them an anytime and anywhere access to trading. You are no longer dependent on the availability of PC, laptop and an internet connection. Trading apps have also become smarter and lighter and that has helped because most trading apps are available in the normal and lighter versions. Especially, among the younger population that is embracing trading in a big way, the app version is a lot more popular.
What sort of tools and indicators can help the retail segment make more informed and timely decisions, which would enhance their trading skills?
Most retail investors depend on calls and ideas from the broker. However, things are changing. For example, basic charting is something most retail investors are already using to fine tune their entry and exit prices. This helps them to reduce their risk of entry and exit. Most retail investors also use F&O analytics like OI, PCR, option valuation tools, Black & Scholes models etc. With a little more sophistication, these retail investors can also take more informed decisions by using Option Greeks too. More advanced charts and option Greeks would be the way forward.
How do you think election outcomes are going to impact markets for the medium term? With the markets already pricing in an NDA win, do you foresee a significant fall if a messy coalition is formed at the centre?
When it comes to election outcomes, we have to separate the noise from the trends. For example, exit polls are all in the form of noise which does influence the market trend. But we have to wait for the final outcome on May 23rd. Markets react in different ways. In 2004, markets touched lower circuit on counting day because the NDA government fell, but by the end of the year, the Nifty was nearly 30% above the pre-election levels. In 2014, the markets rallied sharply on expectations of a Modi government. But in the 5 years of the government, the Nifty has given CAGR returns of around 9%, which is less than the historical returns of the Nifty. It is also interesting to note that some of the most courageous reforms in the budgets of 1991, 1997 and 2000 were under coalition governments. As long as there is a continuation of the reforms process and a market friendly approach, nature of the government should not matter in the long run.
What sectors are you bullish on right now, from a medium term (1 year) standpoint and why?
We still see tremendous potential in the consumer segment, notwithstanding the slowdown in consumption in the last quarter. We see that as temporary and should rectify in the coming quarters. With the anticipation normal monsoon this year and healthy urban demand, we are expecting a good volumes in consumption sector. Also with low interest rates, demand pick-up would be faster, the overall outlook for this sector is bullish. Private sector banking space is also one of the sectors wherein we see decent investment opportunities, given the inherent strengths in some of the leaders in this space.
Lastly, is this the time to go long or short the NIFTY index?
Ideally, we should take a view on the Nifty post the election outcome as that will settle a lot of uncertainties surrounding the markets. In the short term, the Nifty direction would be contingent on the policy stance of the new government and the levels of the VIX. However, over the medium to longer term, we do foresee the Nifty heading higher. So any medium term trade on the Nifty will have to be on the long side. For the short term, it would be a better choice to hedge your long Nifty positions.