After a stellar FY24, what should be our expectations from the market for FY25? Are you positive about the market or do you expect a significant correction?
While a large part of valuation rerating is done in FY24, we expect a superior earning growth trajectory driving market growth during FY25 and beyond.
We foresee a significant acceleration in private sector capex and a pick up in retail consumption (both discretionary and staples) leading to high double-digit credit growth (corporate and retail).
We also expect a revival in rural spending (early signs of the same are visible by the pickup in demand for two-wheelers, fans, lower-end consumer durables etc).
Early indications of monsoons are also positive.
Lastly, we continue to witness strong liquidity flows to the Indian equity market both domestically and overseas.
Also Read: Less chance of market repeating FY24 returns this year, says Krishnan VR of Marcellus
What is the likelihood of the Fed implementing a modest rate cut? How could a shallow rate cut influence market sentiment?
We foresee a strong probability of three interest rate cuts by the US Fed during 2024 and expect the same to be followed in India and other countries across the globe.
US inflation has come down significantly from 8 per cent to 3 per cent vis-à-vis a target of 2 per cent.
We do expect 50 to 75 bps of interest rate cuts during 2025 by Fed which will continue to drive positive market sentiments and higher allocation of capital towards risk assets.
However, one needs to be watchful of global commodity and oil prices and their impact on inflation and consumption.
Also Read: Crude oil prices see a sharp jump; can they sustain gains? How can they impact Indian stock market sentiment?
What sectors would you recommend to bet on at this juncture? Is there still steam left in the PSU segment?
We are bullish on the entire manufacturing space with a special focus on chemicals, API (Active Pharmaceutical Ingredient) pharma, auto and auto ancillaries, and consumer durables.
Healthy credit growth coupled with lower credit costs will continue to drive the profitability of the BFSI sector, however, NIMs will be under pressure due to higher deposit costs.
We see IT as contra play banking on expected rate cuts by the Fed.
Few players have again started the campus hiring program after many quarters of absence.
We continue to remain bullish on PSUs in banking, the power sector and defence.
We have invested in PSU banks with change in leadership driving improvement in governance, technology and asset quality.
The power sector has seen a revival of thermal power capex after a gap of 10 years which will continue for the next 5-6 years.
We have seen a significant increase in order booking (3x jump) of the largest BTG manufacturer in India.
This will result in a material improvement in revenues, margins and return ratios leading to valuation re-rating.
Good quality PSU stocks with credible leadership and business trajectory will continue to do well.
Should we trim our exposure to the defensives and bet aggressively on other segments?
We generally follow growth investing and will never invest in companies where the growth element is missing.
Our advice is to invest in quality growth companies at a reasonable valuation and be there for the long term for the power of compounding to work.
If one follows the above, it does not matter if it is defensive or other sectors.
Also Read: India having mini goldilocks moment, to embrace Amritkal: Motilal Oswal
Earnings season is here. What do you expect? Can we see significant upgrades in Nifty?
We continue to see a strong earnings growth trajectory driven by the manufacturing sector, BFSI, pharma, auto and auto ancillaries.
The IT and consumer sectors may report muted growth in the coming quarter, however, we expect a strong revival during FY 25.
A large part of Nifty upgrades are behind and henceforth we expect Nifty will follow the earning growth trajectory.
Nifty earnings are expected to be 14-15 per cent CAGR over FY24E-26E.
We believe there will be some upgrades driven by IT, utilities and banking. Margin is recouping earlier than expectations across the IT universe.
Also Read: Nifty Bank vs Nifty IT: Which index should you invest in for long term?
Banking is seeing higher recoveries in their NPA table.
Utilities will report good numbers driven by high power demand.
There will be upgrades, but we don’t foresee significant upgrades.
One needs to be stock-specific and this is what our approach is.
FIIs did strong buying in the Indian financial market last month. Do you expect this trend to sustain for the coming few months?
FIIs have bought nearly $4 billion in Indian equities over the last one month.
From a short-term perspective, it seems a lot of buying has happened, however, when one expands the time horizon, numbers look much more different.
Our calculations suggest that Indian equities markets will attract about $1.5 trillion of FII flow over the next 10-12 years.
This will be led by increasing the representation of India in global GDP coupled with higher allocation.
FIIs will continue to be long Indian equities. India is the only emerging country which offers the best growth, best ROE and low cost of capital (an inevitable recipe for high valuation).
India is standing at an inflexion point and is going to experience its “Amritkaal” period over the next 23 years.
The underlying currents are very strong. Stable macros – controlled fiscal deficit, balanced debt to GDP, and stable balance of payment (BoP) will continue to attract FIIs.
As the global cost of capital starts coming down during the year, money will find its flow to emerging markets (India in particular).
Also Read: Wipro CEO Thierry Delaporte resigns: What management change means for company’s growth? What should investors do?
There is a strong influx of retail investors in the market. But most of them do not make significant money from investing. How can investors make money in this market?
Our advice to investors is to spend considerable time doing research on the company before investing one’s hard-earned money.
This requires aptitude and ability to deep dive into business economics, financials, quality of management and reasonable valuation relative to growth.
Compromising on any of the aspects mentioned above is fatal for long-term wealth creation.
One can also hire professional qualified money managers who can perform above mentioned tasks embedded in their investment process.
One should remember the golden rule “Capital protection precedes everything.”
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Disclaimer: The views and recommendations above are those of the expert, not of Mint. We advise investors to check with certified experts before making any investment decision.
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Published: 08 Apr 2024, 05:32 PM IST