2 days Ago
IT, pharma, quick commerce, capital market beneficiaries, travel / tourism, renewable capex, power T&D, EMS, defence and select auto with visibility on new product launches, are the themes to look forward to for H1 2025, says Shreyash Devalkar , Head of Equity at Axis Mutual Fund . However, he said in most of them valuations are high and hence by H2 2025, markets may look forward to evaluating potential triggers in underperformed sectors like lenders, FMCG and IT. Edited excerpts from a chat: The market's mood from bullish to bearish changes very quickly as we saw during the peak in September-end and then the rally which followed from the November lows.
At this stage, how bullish or bearish are you? Change in market emotions is a function of earning growth and absolute valuation. Though headline valuations at market level are high, the segments with relatively less earning growth like FMCG, Lenders, Energy, Metal are not expensive compared to their Pre-Covid valuations, while segments with relatively high earning growth like Real estate, Pharma, Auto, Capital Goods, most B2B businesses with less free cash flows are at higher valuation compared to their pre-Covid valuations. Hence, we expect segments with high valuations to undergo consolidation in the near term, if it lacks new earning growth triggers.
While we continue to find opportunities across the markets, we believe individual stock picking will be important in this market. Stock Trading Masterclass on Value Investing and Company Valuation By - The Economic Times, Get Certified By India's Top Business News Brand View Program Stock Trading Market 104: Options Trading: Kickstart Your F&O Adventure By - Saketh R, Founder- QuickAlpha, Full Time Options Trader 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 Stock Markets Made Easy 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 Market 101: An Insight into Trendlines and Momentum By - Rohit Srivastava, Founder- Indiacharts.com View Program Stock Trading Markets 102: Mastering Sentiment Indicators for Swing and Positional Trading By - Rohit Srivastava, Founder- Indiacharts.
com View Program Stock Trading Dow Theory Made Easy By - Vishal Mehta, Independent Systematic Trader View Program Stock Trading Market 103: Mastering Trends with RMI and Techno-Funda Insights By - Rohit Srivastava, Founder- Indiacharts.com 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 Heikin Ashi Trading Tactics: Master the Art of Trading By - Dinesh Nagpal, Full Time Trader, Ichimoku & Trading Psychology Expert View Program Stock Trading RSI Made Easy: RSI Trading Course By - Souradeep Dey, Equity and Commodity Trader, Trainer View Program Stock Trading Introduction to Technical Analysis & Candlestick Theory By - Dinesh Nagpal, Full Time Trader, Ichimoku & Trading Psychology Expert View Program Sensex and Nifty are poised to end 2024 with 9-10% gains despite all the negative impact of geopolitical troubles, weak earnings in H1FY25 and fractured mandate in Lok Sabha elections. Would you expect double-digit gains again in 2025? It is observed that market returns are closer to nominal GDP growth over a longer period of time.
We expect the same in future. After sharp outperformance in some sectors like Real Estate, Pharma, IT, Auto, Capital Goods, there may be consolidation in them in the near term. Every year in the last three years, markets found mid/small being expensive but growth being superior in them compared to largecaps, they are expected to outperform.
However, due to sharp underperformance of largecap versus mid/smallcap resulting in substantial valuation differential, over the last three years, it’s time to focus on absolute growth v/s absolute valuations in both large and mid/small cap, rather than expecting the same theme to continue forever. Accordingly, markets will become stock specific. A lot of investors have already tweaked their portfolio amid signals that the government's capex spend is picking up and that the Q3 earnings season will surprise on the upside.
Do you predict earnings recovery in the new year? Companies have seen superior earning growth led by margin improvement, strong recovery post Covid, along with government spend and policy actions. We believe factors like margin improvement may not continue for long, however continuation of prudent capital allocation policy by the government to boost both capex and consumption, may drive earnings recovery. Following the Maharashtra election results, we have noticed a fresh wave of buying in capex related themes and PSU stocks.
Do you think that PSUs and capex themes will once again shine in 2025? Among all the sectors, the capital goods sector has shown good earnings growth through various macroeconomic scenarios in the last three years. It has resulted in its outperformance, and overvaluation, which peaked somewhere in May 2024. After that, the sector started consolidating.
However, the relative growth in the Capital Goods sector is still superior to other sectors, while some segments in the consumption part of the economy deteriorated further in the recent past. Hence, post consolidation, markets have shifted to the Capital Goods sector once again. Renewable power and associated need for strengthening Power Transmission and Distribution is driving demand.
Defence sector order announcements have improved in the last few months. Electronics manufacturing services growth continues to be strong. Overall, we expect select capex and PSU companies may continue to do well in 2025.
Which are the top themes that you are bullish on for 2025 and why? Markets are crowding in companies having visibility on earning growth, as well as lesser probability of sharp earnings downgrade. Accordingly, IT, pharma, quick commerce, capital market beneficiaries, travel / tourism, renewable capex, power T&D, EMS, defence and select auto with visibility on new product launches, are the themes to look forward to for H1 2025. However, in most of them valuations are high and hence by H2 2025, markets may look forward to evaluating potential triggers in underperformed sectors like Lenders, FMCG, IT.
What are the key risk factors that can derail the bull run we are in currently as every dip is being bought? Rising geopolitical tension restricts free flow of Goods, Services, Capital and Manpower, accordingly it distorts demand supply scenarios leading to imported inflation. Imported inflation remains a key risk, it may emanate from commodity prices, tariffs, etc. In case of inflation in domestic commodities like Food, or services, as an investor one can always find opportunities in its beneficiaries.
(You can now subscribe to our ETMarkets WhatsApp channel ).
