The market is on an empty road. What should our investment strategy be? Is it the right time to invest in stocks or should we wait for a further correction?
Currently, with high valuations, strong liquidity and positive macro indicators, our markets are experiencing shallow corrections.
We advise our clients to continue investing through SIP as timing the market is a tough task.
As the broader market valuations are rich, investors could use a market correction as an opportunity to add quality stocks (strong business model and corporate governance) from the long-term investment perspective.
Also Read: Indian stock market sentiment upbeat but investors need to be cautious, says Divam Sharma of Green Portfolio, PMS.
Mid and small cap space is witnessing a correction. Would you recommend bottom fishing in them?
Investors need to be stock-specific or bottom-up, because this is where we believe the bottom-up approach can fail.
Here, we advise investors to continue booking profits in mid-cap and small-cap stocks that are trading at stretched valuations and be selective in this space.
Also Read: Morgan Stanley sees significant opportunity for bottom-up stock picking in India; lists its preferred sectors
We have elections this year. How do you expect this major event to affect our stock market?
The likelihood of certain outcomes becomes much clearer after state elections.
We believe that the market has already taken this information into account and is now considering other factors such as the possibility of a rate cut by the Federal Reserve, forecast of the monsoon and announcement of the upcoming Union Budget.
We also believe that the large “disconnect” between price and value may persist, despite the rich valuations across sectors and stocks, should the BJP win the upcoming national elections in May, as is widely expected.
Also read: Why Chris Wood sees 7% real GDP growth and 12-15% revenue growth ahead; lists 3 achievements of PM Modi
What is your outlook on India’s growth and inflation? Is the worst in terms of inflation behind us?
The inflation trajectory has begun to soften although the risks remain tilted to the upside.
We maintain our FY24-25 inflation estimates at 5.4 percent and 4.5 percent.
We continue to expect the RBI to change its stance by the end of Q1FY25 followed by rates in Q3FY25.
We expect real GDP growth of 7 percent for FY24 and 6.3 percent for FY25.
Read also: Stay light before the elections; defence, engineering, railways, infra look overrated, says SAMCO’s Jimeet Modi.
The market is still unclear when the Fed will start cutting rates. When do you expect the Fed to start cutting rates?
US January CPI data showed a 0.3 percent increase from December, with year-on-year growth of 3.1 percent versus an expected annual increase of 2.9 percent, while 10-year Treasury yields hit 4.269 percent with a jump of nearly 2.9- percentage 10 bps, casting doubt on the likelihood of multiple rate cuts this year.
Investors also scaled back bets that the Federal Reserve will begin cutting interest rates as soon as May.
We believe it could come in the second half of CY2024.
Share your views on the FMCG sector. Will the weakness in rural consumption be more painful for them?
Q3FY24 FMCG results showed the familiar trends of weak consumer demand for staples and parts of free sectors.
FMCG companies called for weak demand conditions for Q3FY24 in rural and mass categories and continued pressure from local competition in select categories (tea, detergent bars and biscuits) due to soft input prices.
We expect consumption demand to recover only gradually over the next two to four quarters.
The low quality (in terms of value-added) of the bulk of new jobs may cause structural headwinds to a rapid recovery despite continued strong government and domestic investment.
Possible weak monsoons from El Nino conditions may further delay consumption and rural recovery however.
What do you think about mid-cap IT stocks? As weakness in key Western markets continues, does it make sense to stick only to large IT companies if you want to bet on IT stocks as a whole?
We believe that large-cap IT companies are better bets/options to invest over mid-cap IT companies, as the gap between large-cap companies and mid-cap IT is still high.
Uncertainties are not yet over for the IT sector as the inflation rate in the US is still well above its target rate, which could affect liquidity for the IT sector.
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Disclaimer: The opinions and recommendations above are those of the expert, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 25 Feb 2024, 13:05 IST