After nearly 60 IPOs hitting Dalal Street in the year passing by, "the trend of a high volume of IPOs in India is likely to persist into 2024, buoyed by strong economic initiatives and the evolving maturity of Indian startups," said Sonam Srivastava, founder, and fund manager at Wright Research, PMS in an interview to Moneycontrol.
She feels key sectors poised to dominate the IPO scene include manufacturing, driven by industrial growth initiatives, and technology, especially new-age companies in platform and consumer tech.
On the sectors for 2024, Sonam Srivastava, with more than 10 years of experience in quantitative research and portfolio management, says a high allocation to equities and balancing investments between large- and small-cap stocks across sectors such as infrastructure, banking, consumption, and technology can provide a mix of stability and growth potential.
Q: Do you still see global growth slowdown worries in the coming calendar year? If yes, then do you see it impacting India's economic growth?
In the current global economic climate, recent US data suggesting a slowdown in rate hikes brings cautious optimism. This could potentially ease global financial pressures, offering a slightly more favorable environment for India's economy. However, challenges like Europe's energy crisis, China's property market issues, and geopolitical tensions remain, posing risks to global demand and India's exports.
Despite the possibility of a moderated pace of US rate hikes, higher global borrowing costs could still affect investment in India and slow infrastructure development. Domestically, inflationary pressures may require the Reserve Bank of India to maintain a tight monetary policy, adding to the growth challenges.
India's strategy in this scenario involves strengthening domestic demand through fiscal measures and promoting self-reliance, while adapting to global economic shifts. Balancing these factors with agility and foresight is crucial for India to sustain a resilient economic growth path amidst these uncertain times.
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Q: Will the consumption side likely be weak in India along with export headwinds?
The outlook for India's consumption sector, amidst potential export headwinds, is a complex interplay of challenges and opportunities. On the downside, a global economic slowdown could indeed dampen demand for Indian exports, particularly in sectors such as textiles and engineering goods. This reduction in external demand might lead to job losses, affecting disposable incomes and consumer spending.
Additionally, persistent inflationary pressures, especially in essential commodities, could erode household purchasing power, further constraining consumption. The tightening of financial conditions, with possible interest rate hikes by the RBI, may also make borrowing costlier, adding to the dampening effect on consumer expenditure.
However, there are reasons for cautious optimism. India's robust domestic demand, driven by a young and growing population with rising disposable incomes, has historically shown resilience. The rural economy, often less affected by export fluctuations, could continue to support consumption, aided by factors like favorable agricultural outputs and government support schemes. Moreover, India's expanding middle class presents a significant long-term opportunity for sustained consumption growth.
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Q: Do you expect a significant run-up in the realty space in 2024?
Forecasting a significant upswing in India's realty sector for 2024 requires a balanced view, considering both potential growth drivers and existing challenges. On the positive side, factors like India's young and urbanizing population, rising disposable incomes, and government initiatives in affordable housing are likely to sustain demand.
Additionally, if inflationary pressures ease, the Reserve Bank of India (RBI) might lower interest rates, making home loans more affordable and bolstering buyer sentiment. Policy reforms such as RERA and infrastructure development could further enhance transparency and investor confidence in the sector.
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However, several dampeners could temper this optimism. A global economic slowdown might affect job markets and investor confidence, potentially impacting the real estate market. Resurgent inflation could erode purchasing power and delay investment decisions, while geopolitical uncertainties and supply chain bottlenecks could lead to project delays and increased costs.
Q: Where do you want to park your money, in terms of sectors/stocks, for 2024?
In 2024, a high allocation to equities, balanced between large and small-cap stocks, could be a strategic approach in sectors like infrastructure, banking, consumption, and technology. Government spending on infrastructure projects such as roads, railways, and airports is expected to boost the construction sector and related industries, offering opportunities in both large companies known for stability and smaller firms with potential for high growth.
The banking sector, benefiting from increased economic activity and infrastructure financing, presents investment prospects in both established banks and agile, smaller financial institutions. The consumption sector, driven by India's growing middle class, offers potential in a range of companies, from large consumer goods firms to niche market players.
Technology remains a key area, with opportunities in both large IT corporations and smaller, innovative tech companies at the forefront of digital transformation. Balancing investments between large and small-cap stocks across these sectors can provide a mix of stability and growth potential. It's important to align this equity-focused strategy with individual risk tolerance and long-term financial goals, ensuring a diversified and resilient portfolio.
Q: Do you think the market has fully priced in the expected continuation of the current government for another five years and consistency in policies?
The recent state election results have undoubtedly influenced market sentiments, leading to a surge of optimism regarding the continuation of the current government and its policies for another five years. This optimism is reflected in the market's positive reaction, often termed a "continuity rally," suggesting that investors are pricing in the stability and predictability associated with the current government's extended tenure.
However, it's important to approach this market response with a degree of caution and a broader perspective. Elections, by their nature, are unpredictable, and the political landscape can change unexpectedly. Even within the same government, policy directions may shift in response to global economic conditions and domestic challenges. Additionally, external factors such as international market fluctuations can significantly impact local market sentiments, irrespective of domestic political developments.
Thus, while the current market rally does indicate a strong expectation of policy continuity and government stability, seasoned investors remain aware of the inherent uncertainties and potential shifts in the political and economic environment. The market's current optimism, therefore, is tempered with a cautious approach, recognizing that while the future may seem clear, it invariably holds a degree of unpredictability.
Q: Is it the right time to build exposure to chemical space?
Building exposure in the chemical sector at this time requires balancing current challenges with future growth prospects. The sector, influenced by global supply chain disruptions and competition, especially from China, faces significant headwinds. However, opportunities arise from India's robust domestic demand in agriculture, pharmaceuticals, and FMCG sectors, and the global shift towards diversifying supply chains away from China.
The specialty chemicals segment, known for higher margins and customized products, is particularly promising due to its focus on innovation and niche market appeal. Investors should consider these growth drivers alongside potential risks like regulatory changes and environmental concerns.
A selective approach, targeting companies with solid fundamentals, innovative products, and efficient operations, is recommended. While the sector presents opportunities, careful analysis and consideration of market conditions are essential for making informed investment decisions in the chemical space.
Q: Do you see the flood of IPOs to continue in 2024? Are any names on your radar?
The trend of a high volume of IPOs in India is likely to persist into 2024, buoyed by strong economic initiatives and the evolving maturity of Indian startups. With over 65 IPO filings already with SEBI, and many approved, the upcoming year promises to be active for the Indian IPO market.
Key sectors poised to dominate the IPO scene include manufacturing, driven by industrial growth initiatives, and technology, especially new-age companies in platform and consumer tech. Financial services are also expected to feature prominently, reflecting the sector's expansion.
While specific company names for 2024 IPOs depend on market and regulatory dynamics, investors should watch these sectors closely. Companies with robust fundamentals and innovative models, particularly those aligning with India's economic growth trends, are likely to be among the more attractive IPO prospects.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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