2 weeks Ago
“We remain optimistic about the long-term outlook and believe that India is still in a bull market and has entered a phase of multi-year capital expenditure cycle,” says Rajesh Bhatia, CIO, ITI Mutual Fund. In an interview with ETMarkets, Bhatia said: “Indian market looks vulnerable because not only has it done well but also has become a little pricey (P/E of 20x FY26), and it does not help that the slowdown has brought earnings downgrades” Edited excerpts: Thanks for taking the time out. After a turbulent October we are witnessing a volatile November.
What is your take on markets ? Foreign Institutional Investors (FIIs) sold over $9 billion worth of equities in October, which has contributed to the decline in equity markets in India. The fact that economic momentum in India has slowed due to reduced government spending ahead of elections and heavy monsoons , has not helped either. Stock Trading Candlesticks Made Easy: Candlestick Pattern Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading ROC Made Easy: Master Course for ROC Stock Indicator By - Souradeep Dey, Equity and Commodity Trader, Trainer View Program Stock Trading Stock Valuation Made Easy By - Rounak Gouti, Investment commentary writer, Experience in equity research View Program Stock Trading Technical Trading Made Easy: Online Certification Course By - Souradeep Dey, Equity and Commodity Trader, Trainer View Program Stock Trading Technical Analysis Demystified: A Complete Guide to Trading By - Kunal Patel, Options Trader, Instructor View Program Stock Trading Technical Analysis for Everyone - Technical Analysis Course By - Abhijit Paul, Technical Research Head, Fund Manager- ICICI Securities View Program Stock Trading Complete Guide to Stock Market Trading: From Basics to Advanced By - Harneet Singh Kharbanda, Full Time Trader View Program Stock Trading Commodity Markets Made Easy: Commodity Trading Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Renko Chart Patterns Made Easy By - Kaushik Akiwatkar, Derivative Trader and Investor View Program Stock Trading Markets 102: Mastering Sentiment Indicators for Swing and Positional Trading By - Rohit Srivastava, Founder- Indiacharts.
com View Program Stock Trading Mastering Options Selling: Advanced Strategies for Success By - CA Manish Singh, Chartered Accountant, Professional Equity and Derivative Trader View Program The slowdown has led to downward revisions in earnings projections for both the Nifty and the broader market for FY25 and FY26. This earnings season has seen the worst earnings downgrades compared to 2020. With valuations currently above their long-term averages at over 20x FY26, we expect the market to consolidate at these levels in the near term.
However, we remain optimistic about the long-term outlook and believe that India is still in a bull market. We believe that India has entered a phase of multi-year capital expenditure cycle. Furthermore, the macroeconomic fundamentals are strong.
How do you see the outcome of the US Presidential Elections and its potential impact on Indian markets as well as sectors in particular? With the election result in the United States, uncertainty has risen. The new Government has promised corporate tax cuts, rise in import tariffs, greater deregulation and a crackdown on illegal immigration. These steps may drive up inflation and could push countries towards currency wars.
Already the 10-year US bonds have moved 70-80 basis points higher in the last two months to around 4.4%. This may not be healthy for equity markets around the world.
The election and consequent policy implications also explains partly the conviction of FIIs to sell equities in India. However, considering the US-India ties it may be favourable in the longer term. How should investors take the outcome of the US Fed meeting? What is the kind of rate trajectory you see for the rests of FY2024-25? The rate cut is in line with market expectations.
However, a lot of how interest rates shape up will also depend on the steps that the new Trump administration takes. So, the election of Trump as the President is a significant event and brings about a certain degree of changes in the market scenario. What are the queries that you are getting from your clients? Investors and distributors are seeking to understand the reasons behind the current market volatility and how long it might persist, especially with state elections on the horizon.
They are also keen to know whether this is a deep correction or just a temporary pullback, considering the economic outlook. Additionally, there are questions about whether foreign institutional investors (FIIs) will return and how long it might take for the markets to recover. Earnings season has not been that robust compared to the kind of valuations we are trading at.
Do you see some more stock specific consolidation before a constructive trend can emerge? While there has been a slowdown in India, not all companies and sectors are slowing down. Therefore, we expect the Indian markets to become very “stock specific”, implying that the breadth of what rises in the market may shrink. Overall, we expect a consolidation and a time wise correction of the equity markets in India.
The political uncertainty surrounding elections in certain states, coupled with muted corporate earnings for Q2FY25, has somewhat dampened the outlook for Nifty earnings in the near term. However, the government's emphasis on fiscal spending and the private sector’s capital expenditure (capex) plans are expected to provide economic resilience in the short term. The combination of fiscal support and private investment will play a crucial role in sustaining growth momentum.
It is useful to remember though that India is still in a multi-year bull market. While concerns over weaker consumption and slower growth persist, India’s long-term economic prospects remain positive, underpinned by the expectation of a growth cycle driven by capital expenditure. FII selloff was more than Rs 1 lakh cr in October.
A part of it moved to other EMs, data showed. How is India placed among global peers? Do you see this as a trend going forward? In the short term, the Indian market looks vulnerable because not only has it done well but also has become a little pricey (P/E of 20x FY26). It does not help that the slowdown has brought earnings downgrades.
Which sectors are looking attractively priced at current levels? Private banks, Telecom, Insurance, Capital Goods, Domestic pharma and IT appear like strong sectors in this environment. What is your take on yellow metal and Silver which is also making headlines? Gold has delivered nearly a 30% return in 2024, benefiting from the US government's historically high fiscal deficit, which has prompted central banks to diversify away from US Treasuries. As a result, gold has seen strong gains.
However, looking ahead, after this strong rally and depending on the US government's fiscal policy stance post-election, central banks may reduce their aggressive buying of gold. This may lead to a period of consolidation at current price levels. Analyst Disclaimer - The views expressed are purely personal in nature.
The statements herein may include future expectations and other forward-looking statements that are based on our current views and scenarios. The information herein alone is not sufficient and shouldn’t be used for development of an investment strategy or construed as investment advice. Please consult your financial advisor before investing.
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