"We do not see any significant new risk factors, but the markets may remain volatile until more clarity emerges on Trump’s on-again, off-again tariff threats," Ashwini Shami, the Executive Vice President & Portfolio Manager and co-founder of OmniScience Capital said in an interview to Moneycontrol.
For long-term investors, he believes this could be a great time to allocate fresh capital or rotate their investments into more favourable and mispriced pockets.
According to him, fourth-quarter earnings (Q4FY25) are expected to broadly remain muted, except for some sectors such as banking, housing finance, and infrastructure-related sectors.
"The revival of government capex in the second half of the year, coupled with demand from the private sector, may continue to support double-digit credit growth for banks," said Ashwini Shami who has more than 2 decades of experience in the financial services industry.
Do you think the market may stabilize from April onward, given the expected clarity over the tariff on April 2 and the beginning of the quarterly earnings season?
The markets may remain volatile until more clarity emerges on Trump’s on-again, off-again tariff threats. Though we do not see any significant new risk factors, investors may continue to experience market volatility. For long-term investors, this could be a great time to allocate fresh capital or rotate their investments into more favourable and mispriced pockets.
Do you expect the second rate cut of this cycle by the RBI in the April policy meeting?
Retail inflation, as indicated by the Consumer Price Index, fell to a 7-month low of 3.6%, below the mid-point of the RBI’s target inflation range of 2-6%. With inflation fears receding significantly, the RBI may announce another rate cut to strengthen the growth outlook by creating favourable conditions for capital expenditure (capex) growth and consumer spending.
Do you believe digital platform companies will see significant growth going forward?
Digital platform companies have long-term high growth potential, as they are disrupting traditional landscapes and creating new areas of growth for themselves—fintech and quick commerce are a few examples. We believe that long-term investors should focus more on valuations and not get carried away by high growth expectations. Since some of these large digital platforms are still discovering their unit economics, normalized margin profiles, and long-term sustainable growth, it becomes even more challenging to value them. This is where a conservative approach can help investors build a sufficient margin of safety.
Do you see opportunities in midcap IT stocks, with a correction in large-cap IT stocks?
The growth outlook for IT stocks, both mid-cap and large-cap, remains uncertain due to the trade war tensions in the US. There is also renewed chatter about a potential US recession triggered by high inflation, high interest rates, and falling consumer confidence. This could force companies to hold back projects and slow down IT spending. While the sector has corrected significantly from its peak, most of the stocks still remain just about fairly priced.
Do you expect the US Federal Reserve to hold the Fed funds rate steady at 4.25-4.5 percent this week?
The Trump administration’s tariff wars with key trade partners and broader uncertainties regarding trade policies have fueled expectations of rising inflation. This has left limited room for the Fed to cut rates in this week’s FOMC meeting. While the job market held steady last month, the inflation rate (CPI), which declined to 2.8% in February from 3% in January, still remains well above the Fed’s target of a 2% annual inflation rate.
What are your broad expectations for the March quarter earnings?
Fourth-quarter earnings are expected to broadly remain muted, except for some sectors such as banking, housing finance, and infrastructure-related sectors. The revival of government capex in the second half of the year, coupled with demand from the private sector, may continue to support double-digit credit growth for banks, while asset quality has improved steadily.
Are you fully invested in the current market sentiment?
We are finding significantly large pockets of mispriced opportunities in the current market. At the index level, large caps are attractively priced, but we can also identify a large pool of companies in mid- and small caps at attractive valuations. Our flagship flexicap strategy, which includes nearly 30 stocks with allocations ranging from 40% to 25% across large, mid, and small-cap segments, currently has a P/E ratio of 10.85, with a potentially double-digit growth outlook for the portfolio companies. With such attractive valuations, portfolio quality, and growth outlook, we are fully invested at this point.
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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