Given the market performance over the past 3-4 years, one would expect some moderation in the coming year, said Pramod Gubbi, Co-founder at Marcellus Investment Managers in an interview to Moneycontrol. In fact, he expects that this consolidation sustains into 2025 with risks to the downside.
On the sectors front, he believes private sector financials are perhaps the only sector attractively valued. "Relative to the market, IT and pharmaceuticals provide reasonable earnings visibility despite high absolute valuations," said Gubbi.
Do you see any major challenges for economic growth in 2025?
The most important challenge is around consumption growth. Some part of the weakness is cyclical and is likely to recover. But the bigger challenge around job creation hindered by growing automation across industries is likely to remain the biggest challenge going into 2025 and beyond. Government policies in the recent past recognise this challenge and hopefully reforms should help address it somewhat.
What are your broad expectations for the Union Budget scheduled for next year?
We expect the Budget to continue to show fiscal consolidation. However, we might see a shift in government expenditure from capital expenditure which has been very strong over the past 3-4 years to revenue expenditure, given the challenge around job creation and the need to boost consumption. On the revenue front, there doesn’t seem to be too much flexibility beyond expansion of the tax net and increase in tax to GDP ratio.
Do you think the total repo rate cut by the RBI will be restricted to 75 bps in 2025?
Clearly, given fiscal consolidation amidst weakening economic growth, monetary policy will have to do the heavy lifting in terms of boosting growth. Having said this, the RBI’s need to delicately balance the need to boost growth and external conditions such as a likely stable rate scenario globally, especially in the US given Trump’s likely inflationary policies, which in turn could pressure on the rupee, might limit the scope for rate cuts beyond 75bps.
Do you believe the real estate sector valuations are still far from their peak?
The rally in real estate prices over the past few years has resulted in affordability across most Indian cities going down, especially outside the luxury segment. Whilst investor demand has been healthy, end user demand is important to sustain prices and project sales growth. To that extent real estate sector valuations might see downside risks.
Which sectors are on your radar for 2025?
We see limited value in the market. On absolute valuations, private sector financials are perhaps the only sector attractively valued. Relative to the market, IT and pharmaceuticals provide reasonable earnings visibility despite high absolute valuations.
What is your take on the equity market performance in 2024? Do you expect better performance in 2025 compared to 2024?
I reckon 2024 market performance held up despite the weakening earnings growth, largely driven by domestic investor inflows. Furthermore, given the performance over the past 3-4 years, one would expect some moderation. I would expect that this consolidation sustains into 2025 with risks to the downside.
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.
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