ETMarkets Smart Talk: Sell in May? FIIs might pause, but earnings will steer market: Hemant Kanawala

In this edition of ETMarkets Smart Talk, Hemant Kanawala, Head – Equities at Kotak Life Insurance, shares his insights on the recent market volatility triggered by global tariff concerns and rising geopolitical tensions.

While foreign investors (FIIs) have turned cautious, Kanawala believes the trajectory of corporate earnings will play a decisive role in determining the market’s direction.

He discusses the impact of potential US tariffs on the pharma sector, the benefits of falling crude oil prices for India, and why a disciplined investment approach is crucial in a sideways market.

With Nifty likely to consolidate between 22,000 and 25,000, Kanawala emphasizes the importance of asset allocation and long-term perspective amidst short-term noise. Edited Excerpts –

Q) The month of May started off on a volatile note with the tariff war & now India-Pakistan tensions. What is your take on markets?

A) We believe that the market will consolidate in the range of 22,000 to 25,000 as it navigates through uncertainties with regards to tariffs, geopolitics and earnings.

Concerns regarding these will cap the upside in the near term. On the lower side, at 22,000, valuations are closer to the long-term average and hence limit the downside.

Q) Why this sudden selloff in the pharma space? There is some chatter after U.S. President Donald Trump signed an executive order to ramp up domestic drug manufacturing.

A) The US President has not yet announced tariffs on the pharma sector, as healthcare is a politically sensitive subject and a large component of the US economy in terms of expense.

However, he has reiterated that tariffs on the pharma sector will be announced soon. This uncertainty has led to a correction in pharma stocks.

Q) May has been relatively good for bulls as Nifty closed with gains in 7 out of the last 10 years. Will FIIs on a selling spree – will we see ‘sell in May & go away’?

A) It is difficult to predict the near-term direction of the market amid the uncertainties mentioned above. Investors will focus on the trajectory post-current earnings season.

If the earnings outlook is stable, then the current positive sentiment towards India can continue.

Q) What is happening with Crude oil? We are seeing some wild swings in commodities. Lower crude oil will help the economy. How do you see the scenario for India?

A) Prices are lower as the demand outlook is weak, and OPEC has increased supply. Lower crude oil prices help India in terms of lower current account deficit and inflation.

It also improves the government’s ability to support the economy through fiscal and monetary measures.

Q) What is your take on earnings and how the next few quarters are likely to pan out?

A) As GDP growth remains in the range of 6%, inflation is below 4% and the margin outlook is stable, earnings are likely to grow at the high single digit to low double-digit in the near term.

As the global trade scenario stabilises and the Indian economy accelerates, earnings growth can improve.

Q) It looks like we have entered a sideways market, and money-making might not be that easy. Patience and the right stock selection might be the key. Is staying on cash just like Buffett ($335 bn) the right strategy?

A) Investors should decide on asset allocation based on their risk appetite and avoid creating large deviations from it.

Volatility is part of the investment process, but experience suggests that a disciplined approach to investing helps in achieving investment goals.

Q) Equity is good but there is some chatter on the Street that bonds might do well in the short term. What are your views? What should be the ideal asset allocation?

A) Ideal asset allocation is always individual specific and will be based on their risk appetite.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)