Taher Badshah, CIO of Invesco Mutual Fund believes that there has been a shift in market focus from macroeconomic factors to corporate earnings. “I think what we've seen up until now, whether it be in the large cap space, mid-caps as well, there's been a fairly strong delivery of earnings. We are still halfway through the earnings season.” he said, speaking to CNBC-TV18.
Invesco Mutual Fund maintains its preference for mid- and small-cap stocks despite the recent volatility. Badshah believes that sector-specific opportunities will continue to drive growth. Midcaps, he added, have recorded an impressive 18% year-on-year growth. “This strong performance has helped sustain investor sentiment despite broader market volatility,” he said.
Sector view
Badshah added that sectors such as NBFCs, pharmaceuticals, industrials and defence are among standout performers, with his fund having increased exposure to these areas in anticipation of continued strength.
Badshah noted that China will be a bigger beneficiary, this time round, from increasing capital flows into emerging markets, and foreign investor flows into emerging markets may not be as India-centric going forward, with China also coming back into focus. .
He said the unlikely and new nature of growth in the Chinese economy and with more weight on technology and automation, China could attract foreign flows who may not find similar exposure in India. “It will be India plus China in terms of flows as we go along… especially if emerging market flows improve on aggregate.”
On the real estate front, Badshah remains bullish following recent corrections. He prefers companies with the potential to expand pan-India. Falling interest rates and early-cycle dynamics support this positive outlook.
“I like real estate, and especially after this correction, I think real estate is an area which we would still prefer. As we see declining interest rates, that should be further supportive (of sectoral growth).” he elucidated.
In consumption, he suggests that there's a cautious tilt. With urban consumption slowing, there's a shift toward value retail and Quick Service Restaurants (QSR), particularly in tier 2 and 3 markets, where upcoming rural recovery and increased disposable income could drive growth.
Badshah advises investors focus on earnings and sectoral rotation as key strategies in navigating the current market environment.
“Things are probably likely to change. Perhaps if we get a good monsoon, interest rates are already coming down, inflation is coming down. That probably gives a little more space for discretionary spending to go up in the mass segment of the income pyramid.” he said.
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