It’s only in 2023 that markets will see a turnaround from the current climate of volatility, according to Kenneth Andrade, even as the downside won’t be as bad as 2020.
The adversities of 2022 will be milder than the bloodbath of 2020, Andrade, founder and chief investment officer, at Old Bridge Capital told BQ Prime’s Niraj Shah. The market “will probably just drift sideways or drift down”.
“You take the worst scenario that happened in 2020, where we almost lost two quarters of turnover and still, we have been able to deliver so far,” Andrade said. “So, you define the bottom of your earning cycle, and it is not going to go below that. From there, you have to figure out how much higher it would go.”
For now, markets will drift to sideways, with a bias to decline by around 10% in the worst-case scenario, he said. “Markets are not rich in pricing, but they’re not very cheap either. [They’re] Sitting somewhere in the middle. The answer to ‘does it become cheap before it goes back again’, I will not be able to answer that,” he said.
Andrade’s caution reiterates commentary from analysts and companies that Indian markets are expected to correct but not as much as feared. While growth forecasts are being scaled down, headwinds of inflation, commodity spike and rising rates have so far not derailed the economic recovery. It’s also being aided by global supply chains looking at India as a potential alternative to China.
Andrade, however, is cautious of the rupee making Indian manufacturing competitive. The “two global engines” of the U.S. and Europe can enter a manufacturing cycle and rebuild their economies underpinned by the strength of dollar and the weakness of euro, he said.
This migration that you are seeing from China to India, and Europe to India will hit a cyclical hump in the ongoing September-December or maybe in the January-March quarter. When manufacturing resumes, “you could see that shift going back again”, he said. “Enjoy the cash flows for a quarter or two, but I am wary of the other side.”
Yet, pockets of opportunity exist, combined with reasonably good levels of infrastructure, government-led, and non-discretionary consumption, he said. Export-related issues will remain, but they will not be as broad-based as they are now, according to Andrade. “Things will marginally improve, better than where we are standing right now.”