Daily Voice: Keep return expectations muted for next 1 year after stellar run in markets, says Quest's Aniruddha Sarkar

Over the last 30 months, we have seen two major geopolitical events one in Russia-Ukraine and the other in the Middle East between Israel and its neighbours. The world economy has lived through both of these and the Russia-Ukraine had severely impacted energy supply and prices for Europe largely. Still, India remained largely unaffected due to the discounted oil we received from Russia. Currently, global growth rates have cooled off and China, one of the largest consumers of oil & gas has also slowed. In the face of all these, I do not see geopolitics hampering energy supply lines for India at least in the near to medium term.

Do you expect the Fed to cut the interest rates by 150-200 bps by the end of 2025, in addition to 50 bps cut already announced?

I feel the recent cut was quite steep and subsequent cuts might not be that steep unless the macro data in US worsens which doesn’t seem to be happening as of now. I believe till end of CY 2025 we could see 3-4 rate cuts adding up to 100-150 bps.

After healthy double-digit gains so far in the current calendar year, do you think the market may see single-digit gains in the next one year?

We have been telling investors to keep their return expectations muted for the next 1 year considering we have had a stellar run in the markets in the last 1 year with portfolios giving 50-60 percent returns. In the first half of the next 1 year, we could see increased volatility owing to multiple political events in India and the US and also slowdown concerns in both developed markets of Europe and the US and also China and Japan. However, with 6 months of time correction and small price corrections, we could see Indian market valuations attractive 6 months from now and the second half of the next 1 year could see some sharp run-up leading to full-year returns from the market being in high single digits to mid-teens.

Do you see the fear of tariff actions against China and Europe post-US elections?

I think tariffs and China are inseparable now as world economies try grappling with increasing jobless data on home grounds and are becoming more localised in various manufacturing aspects or even shifting base away from China to other countries like Vietnam, Indonesia, and India. Also tackling security threats during conflicts that might arise due to over-dependence on China for everything is one factor for which tariffs could rise for more products coming out of China including a complete ban on some sensitive technological products.

Do you prefer to stay away from the chemical space?

We prefer selective specialised chemicals where both valuations and growth are higher than industry and also past concerns about margin weakness have reversed. We would continue to avoid base chemicals as we see concerns of oversupply in the domestic and global market because of which pricing pressure continues.

What are the recent additions to the portfolio amongst sectors?

We have increased our allocation towards Pharma as we see good growth and value there. Also, we have increased selective exposure into banking sector as again valuations seem to have bottomed out. IT is the third sector where we believe the worst is behind us and we have added some weight there.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.