In an interview with ETMarkets, Bhatia who has more than 30 years of investment experience in Indian equities said: “Furthermore, we believe that the large cap is not expensive, as it is trading well at 20x FY26 earnings compared to the 10-year average of 17-18x” Edited quote:
After 3 consecutive months of positive returns, the Nifty started September on a muted note. What does D-Street weigh in?
September 2024 has seen the Nifty fall 1.19% (till 9 Sep’24) tracking weak macro data from the US, increasing China-US trade dispute, unpredictability around the US presidential election, and lack of stimulus policies from China to propel the economy . expansion.
This along with heightened geopolitical tensions across the globe, has caused the overall sentiment in Indian equities to move in bearish territory.
We remain vigilant for major risks that could affect the market, although at this time, they seem elusive.
The conversation is slowly picking up, especially in the US, which can also be applied to other advanced economies. What is your view on its impact on India?
Weak macro data coming out of the US gives a sense of calm in the US. A phase of volatility in Indian equities in the near future cannot be ruled out, given the early signs of weakness in global equities.
That being said, India’s economy will be in a better place than its peers due to strong domestic macro and micro headwinds.
Expected GDP growth rate of ~7%, moderate retail inflation, range-bound crude oil prices, declining 10-year G-sec yields, stable currency, and flexible corporate earnings put India in a bright spot.
With corporate earnings being reported in line with expectations and policy initiatives like PLI, among others, bodes well for Indian equities.
Hence, we remain positive on medium to long term outlook of Indian equity market supported by healthy macro and retail participation.
Market record highs – are you cautious or more bullish at current levels?
Even as the Indian market reaches record highs, there are several investment opportunities.
India is a growing economy and hence the value is always high, however, we try to focus on understanding the real reasons behind India’s fundamental growth (mainly capital spending, infrastructure development, and policy reforms) and focus on companies that can be of value. buy across sectors. Overall, however, the market continues to remain strong.
Is your phone in the small & midcap space?
The trajectory of earnings in the middle and small is faster, which explains why they perform well even if the price is now stretched.
Certain sectors such as chemicals and materials have companies only in medium and small places. Many businesses in sectors such as defense, capital goods, engineering, and electronics manufacturing are representative of significant growth opportunities in the medium and small space.
We feel that stock selection in the mid and small cap space is key to achieving potential returns.
What sectors are you currently overweight and underweight?
With dynamic macro conditions and increasing volatility across asset classes, we continue to adopt a strategy to run a diversified portfolio.
We focus more on the stock selection process within the sector rather than trying to take overweight/underweight positions across sectors. The specific themes we are currently bullish on are:
- Information Technology
- Chemical
- Infrastructure
- Native
- Formalization
- Manufacturing
- Premiumization
- Auto & Auto Ancillaries
Disclaimer – Views expressed are personal in nature only. Statements herein may include future expectations and other forward-looking statements based on current views and scenarios. The information contained herein alone is not sufficient and should not be used for the development of investment strategies or considered as investment advice. Please consult your financial advisor before investing. The stocks/sectors mentioned above are not recommendations and ITI Mutual Fund may not have positions in these sectors.
You have seen many market cycles in the past and many investors usually get stuck here – to hold their money or deploy fresh money at current levels. What should investors do if they plan to deploy new capital?
There is no point in timing the market. Investors should focus on the bigger picture and the opportunities that Indian equities offer. The market is likely to remain strong over the long term. However, looking at the current market situation, investing in lumpsum requires a high level of confidence.
During phases of higher volatility, gradual deployment can be a wise technique. Understanding the client’s risk tolerance and investment comfort level is also important.
Some clients prefer to invest gradually to avoid the stress of potential market changes, while others may prefer a lump sum investment if they have a long-term perspective.
Investors can use Systematic Investment Plan and Systematic Transfer Plan options to optimize this volatility as it will provide rupee cost averaging benefits and help them maximize returns from the market.
Which sectors look undervalued, or contra buys at current levels?
This has been a bull market with an incredible breadth of sectors involved. On a sector basis, there is still value comfort in private banks, telecommunications, and life insurance companies.
Furthermore, we believe the large cap is not expensive, as it trades well at 20x FY26 earnings versus the 10-year average of 17-18x.
Revaluation of mid-caps and small-caps looks long, although we also believe that India’s growth opportunities are best captured by the mid-cap and small-cap sectors.
How do you pick stocks, especially when the market is trading near record highs?
We believe that the current investment environment is a ‘stock picker’s paradise’. Although the market is trading at record highs, we can still see pockets of opportunity in market capitalization.
With a bullish outlook across all sectors, we look at each company individually and identify opportunities by looking at fundamentals and balance sheets to identify potential opportunities by picking bottom stocks.
Disclaimer: All figures and data given in the document are dated unless otherwise stated. In preparing the material contained in this document, ITI Asset Management Limited (“AMC”) has used publicly available information. However, AMC does not guarantee the accuracy, reasonableness and/or completeness of any information. The information provided is not intended to be used by investors as the sole basis for investment decisions, who must make their own investment decisions, based on their investment objectives, financial position and specific investor needs. Investors are advised to consult their own tax and financial advisers to determine possible financial, legal and other financial implications or consequences before making any investment decision. The information contained herein should not be construed as predictions or promises nor should it be construed as investment advice. AMC (including affiliates), Mutual Funds, trusts and officers, directors, personnel and employees, are not responsible for any loss, damage, including but not limited to direct, indirect, punitive, special. , exemplary, consequential, as well as any loss of profit in any way arising from the use of this material in any way. The statements made herein may include statements about future expectations and other forward-looking statements that are based on our current views and scenarios and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ. materially from what is shown or implied. in that statement. Readers are responsible/responsible for decisions taken based on this information.
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