Post general elections results, "companies aligned with the government's infrastructure push are poised for sustained growth," Shailendra Kumar, Chief Investment Officer at Narnolia Financial Services said in an interview with Moneycontrol.
Further, look for opportunities in auto components, chemicals, pharmaceuticals, and electrical machinery & electronics, he said.
Shailendra, who has more than two decades of experience in fund management and investment advisory, anticipates some profit-taking in the mid and small-cap space post general elections results.
What do you make out of the huge dividend payment by RBI to government?
The Reserve Bank of India's (RBI) decision to more than double its dividend payout to the government is a welcome surprise. This significant increase likely stems from the high yield on the RBI's substantial foreign exchange reserves. This Rs 2.1 lakh crore dividend will provide a much-needed shot in the arm for the government's finances. It's expected to reduce the fiscal deficit by nearly 0.35 percent, easing pressure on the money market as government borrowing needs are likely to decrease.
Furthermore, with the potential for a lower fiscal deficit, India's credit rating by rating agencies could see an upgrade in the future. This would signify a more robust and fiscally responsible economy.
Which are themes to focus on if there is a policy continuation after general elections?
Companies aligned with the government's infrastructure push are poised for sustained growth. Also, look for opportunities in auto components, chemicals, pharmaceuticals, and electrical machinery & electronics. Large banks offer a compelling risk-reward proposition due to their strong fundamentals.
As India's economic confidence grows, expect well-managed Indian companies to emerge as major players on the global stage. In several industries, Indian firms have the potential to become top-three leaders by market capitalization. This presents a unique opportunity for investors seeking long-term wealth creation.
What do you expect from the RBI monetary policy in June? Will the RBI remain worry about food inflation, although there is a hope for good monsoon this year?
While global inflation appears to be cooling, with central banks like Brazil and Switzerland initiating rate cuts, I don't expect the RBI to follow suit in June. Also, the June policy will be just after the election results and RBI would like to see the forthcoming budget before taking a definitive stance. June also sees policy meetings by the US Federal Reserve and the European Central Bank. The RBI will likely monitor their decisions before making any rate adjustments.
Sectors where you remained invested, even after March quarter earnings?
Our portfolio strategy has shifted slightly, focusing on optimizing exposure by market capitalization. We're exiting smallcap holdings where valuations seem inflated and strategically increasing our allocation to largecap stocks with promising growth potential. Sector selection remains largely consistent.
We favour companies positioned to benefit from the government's infrastructure spending plans. Additionally, we maintain positive outlook on banking, automobiles, and the consumer internet sector. Notably, the chemicals sector appears to be regaining momentum based on March quarter results.
Do you expect the drastic change in market trend, especially after the Lok Sabha election results due on June 4?
While there might be an initial rally after the election results, I anticipate some profit-taking in the mid and small-cap space. This is because many of these companies are currently trading at high valuations, and could be due for a price adjustment or a period of consolidation.
Are you adding exposure to the companies that building AI infra?
We're bullish on Indian companies involved in Artificial Intelligence (AI). Historically, major economies during their growth spurts tend to dominate the key technologies of that era. China, for example, capitalized on telecom equipment, electric vehicles, and solar power during its high-growth period (2005-2020). Similarly, Japan and South Korea established themselves in consumer electronics (like televisions) during their economic booms.
India is now on the cusp of its prime growth phase, and AI is poised to be the defining technology of the next decade or two. As a result, Indian companies that provide the infrastructure for AI development are likely to experience significant growth for many years to come.
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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