Daily Voice: Capital goods, auto sectors poised for continued growth after strong Q4FY24 earnings, says this investment expert

Do you expect auto space rally to continue in the current financial year, too?

The auto industry is not just growing but thriving. With robust growth in SUVs, EVs, and 2-wheelers and the continued popularity of SUVs offering higher margins for automakers, the sector is poised for success.

The rapid growth of the electric vehicle (EV) market, the launch of several new hybrid and electric cars, and the sector's significant contribution to total auto exports in 2022-23 all point towards a promising future for the industry.

Do you see the Indian equity markets trading at expensive valuations relative to history and bond yields?

Historically, there is a negative correlation between equity valuations in India and US bond yields. When bond yields rise in the US, investment in Indian equities becomes less attractive, FPIs become net sellers, and the P/E multiple contracts.

While Indian equities may be trading at expensive valuations, it's important to remember that markets are forward-looking. They have assumed that the current economic recovery will continue, demonstrating their resilience and potential for growth. This should instill a strong sense of confidence in investors, reassuring them of the stability and potential of the Indian equity markets.

Do you expect any major headwinds for the equity markets that can bring significant correction in the short term?

While factors such as interest rates coming down, benign inflation, and the potential positive impact of events like elections on consumption and investment activity are seen as tailwinds for the market, it's crucial to be aware of potential risks.

Any change in these factors, such as a sudden increase in inflation or a shift in government policies, could significantly impact the valuations and cause short-term corrections.

Do you think the IT sector should be added to the portfolio now?

The IT sector is currently in the same phase that US tech companies went through last year, seeing slow growth, and hence, the focus is on reducing costs and maintaining margins. The sector goes through shallow cyclicality.

While it may be beaten down currently, its resilience, potential for growth, and ongoing technological advancements make it a favourable choice for investors looking to diversify their portfolios in a sector that shows promise and potential for the future.

Are you bullish on the insurance space?

India's insurance market is forecasted to have the fastest-growing insurance sector among G20 countries in the next five years. Growth is primarily driven by favourable government policies, rising incomes, and increasing financial awareness among the middle class. These factors have led to a rise in competitiveness, innovation, and new product offerings, positioning India as one of the fastest-growing insurance markets globally.

The Insurance industry was primarily dominated by offline channels like corporate agents, offline brokers, or banks. Today, rapid digitization, product innovation, and progressive regulation policies have allowed consumers to buy insurance through multiple distribution channels with the click of a button.

Low penetration, rapid digitalization, and increasing financial awareness are reasons to be bullish on insurance.

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.