Investor sentiment may improve with a revival in infrastructure spending and a recovery in consumption owing to the good festival season, believes Sachin Bajaj of Max Life Insurance.
Post Q2 results, the Executive Vice President and Chief Investment Officer expects full-year Nifty earnings to grow by a single digit and CAGR growth for FY24-26 to be around 10-12 percent.
Even after a steep correction, Max Life has not made any significant changes to its sector allocations. "We continue to prefer sectors that are driven by domestic growth stories like consumer discretionary, banking, healthcare and pharma, IT, digital, domestic manufacturing, and power sector value chains," said the seasoned investment professional with more than 25 years of experience in banking, insurance, investment advisory, and business and strategic planning.
Do you think the market will remain in a consolidative phase for the next couple of months? Are valuations looking slightly more reasonable now?
The equity markets have shown robust returns over the past few years. However, in the last 1-2 months, volatility has increased due to global events like geopolitical tensions, the US elections, and the slowdown in earnings growth observed in recent quarterly results. Previously, markets were trading at higher than the long-term average valuations. With the recent correction, many stocks have now reached a more reasonable valuation zone. Moving forward, the key focus will be on earnings growth in the upcoming quarters. If there is a further slowdown in earnings growth, the major indices may enter a consolidation phase in the near term.
Which sectors are on your radar for buying after the recent sharp correction?
We have not made any significant changes to our sector allocations. We continue to prefer sectors that are driven by domestic growth stories like consumer discretionary, banking, healthcare and pharma, IT, digital, domestic manufacturing, and power sector value chains.
Do you expect single-digit earnings growth in FY25 due to pressure in Q2FY25, but more than 15 percent growth in FY26?
The H1FY25 witnessed lower-than-expected growth in earnings due to lower public capex, a slowdown in urban consumption, and asset quality issues. Post the Q2 results, for full-year FY25, we expect Nifty earnings to grow by a single digit and CAGR growth for FY24-26 to be around 10-12 percent. Looking ahead, investor sentiment may improve with a revival in infrastructure spending and a recovery in consumption owing to a good festival season.
Are you betting on both PSU and private banks over NBFCs?
We believe that the banking and financial sectors are reasonably valued when compared to historical valuations. Consequently, we continue to stay invested in these sectors. In terms of preference, we hold investments in both large private and public sector banks, as they offer better growth potential at reasonable valuations at this point in time.
Is the metal sector better for trading than for long-term investment?
The Metals sector is a cyclical sector and tends to follow economic cycles. In addition, the sector is influenced by other factors such as currency fluctuations, geopolitical developments, etc. We are long-term investors and hence take a slightly longer-term view of global economic growth, looking for robust balance sheets and capital allocations when investing in the sector.
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