As the Federal Reserve takes initial steps toward removing its massively accommodative policy, investors are preparing for the main show ahead.

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Fed officials on Wednesday penciled in two potential rate hikes in 2023, sooner than policymakers had previously projected, and Chair Jerome Powell edged closer to unveiling plans to taper the Fed's $120 billion a month of bond purchases, as per a Reuters report.

Pathik Gandotra, Partner at Dron Capital spoke to CNBC-TV18 to discuss fundamentals of the market in light of this.

“Inevitable Fed taper noise has started already and so my point is that this is what will reverberate across all central banks eventually over the next 6-12 months. So the news flow that you will get eventually is that every central bank is tapering, either reducing its accommodative monetary policy and that is certainly not good news for the markets from a short-term perspective,” Gandotra weighed in.

“The last time US Fed did the taper-tantrum that happened, we fell by 20 percent, but this time we are on a much stronger wicket. We have got a very strong foreign exchange reserves and the flows in the country are also very strong. The overall India macros are not looking that bad. So you might correct, you might consolidate, but at one notch bullishness will have to come down. I would be very circumspect about markets from here on,” he added further.

On portfolio approach Gandotra wants stay away from interest rate sensitives.

"Interest rates eventually will rise. So interest rate sensitives, banks etc. is what I would avoid,” he reasoned.

What is Gandotra bullish on? “I would put money into tech and pharma where you have had reasonable consolidation over a period of 3-4 months. I think stocks ran-up to fast and they had to catch up and they have caught up now and so I think tech earnings will be very robust and pharma selectively will also be pretty okay. So I would stick there,” he said.

For full interview, watch accompanying video.

Also Read: FOMC key highlights: Fed Reserve Chair Jerome Powell holds for now but moves up rate hike timeline

(Edited by : Abhishek Jha)

First Published:Jun 17, 2021 2:17 PM IST