After recent US economic data points, Ashwini Shami, Executive Vice President and Portfolio Manager of OmniScience Capital believes that it is quite likely that Fed will announce the first rate cut in the April-end meeting as it will have two more months of inflation data by then.
But, as the US core PCE number (at 2.8 percent in January) is on a consistent downward trajectory, the fed funds rate may be possible in the March meeting itself, the co-founder of OmniScience Capital feels.
On the sectors, Ashwini with more than 2 decades of experience in the financial services industry says some of the large segments of the market such as private and public sector banks, power, IT and Infrastructure are still available at significant discount to intrinsic value.
Do you see the possibility of Tata Sons hitting Dalal Street with IPO or will they consider other options to comply with RBI’s upper-tier NBFC norms and avoid IPO?
We believe Tata Sons will consider other options to comply with RBI’s norms and avoid listing. Given that the Tata Sons promoters intent is not to unlock the value of the holdings, there is little reason to list the holding company and they would explore alternatives to comply with the RBI requirements including restructuring or debt reduction to avoid listing.
Also read: Tata Sons' IPO unlikely soon, company seeking options to comply with RBI norms
Do you think the market rotation from smallcaps to largecaps has been taking place, especially after the SEBI and AMFI move to safeguard the interest of retail investors?
SEBI and AMFI move is a welcomed step to strengthen retail investors confidence in equities market. The recent smallcap and midcap outperformance clubbed with the general belief that smallcap/midcap provide higher returns than largecaps, it is possible that most of the retail money will continue to chase mid & smallcaps.
Mid and smallcap segments have relatively much higher valuations and hence, a prudent approach is warranted for the two segments. The rotation to largecap is imminent given the attractive valuations and strong growth outlook for IT and Banks which have a big representation in largecap segment.
Also read: Cannot let AI models be brought into public domain without proper testing, says Ashwini Vaishnaw
Do you see the Federal Reserve beginning interest rate cuts in second half of 2024 despite inflation reaching to its 2 percent target?
We believe that it is quite likely that Fed will announce the first rate cut in the April-end meeting as it will have two more months of inflation data by then. The core PCE number for January 24 came at 2.8 percent and as it is on a consistent downward trajectory, we may see a rate cut in March 20 Fed meeting itself. Either way, a 2nd half rate cut scenario is less likely.
Are the valuations cheaper in consumption space and chemicals segment?
Valuations are far from cheap in the consumption space vis-à-vis the growth potential for the consumption companies. Even for the chemical segment the overall valuation is high. For both consumption and chemical segments the current average valuations are above a price to earnings multiple of 40. This may be lower than the valuation levels seen in the past but this may not yet be the sustainable valuation level for these segments.
Do you see the market reporting another (maximum) 5 percent run up before getting into correction mode?
Many investors have a love-hate relationship with the corrections. While they would love to see a correction to get an entry point, they equally hate it when it actually happens as they lose the confidence to allocate capital while going through the correction.
More than some X% run up or down, the valuation levels guide us on the attractiveness of the market and we see some of the large segments of the market such as Private and Public sector banks, Power, IT and Infrastructure still available at significant discount to intrinsic value.
Your take on the recent action taken by the RBI on several entities?
We have seen heightened capital market activities such as IPOs and secondary market allocations in the recent past. RBI and SEBI's recent actions are possibly intended to manage these activities in a better way.
Of late, RBI has also flagged concerns with rapid growth in retail loans in some segments. We believe that these actions are broadly targeted to strengthen ethical business practices in the capital markets and hence a plus in the long run.
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