Nilesh Shah, Managing Director at Kotak Mahindra Asset Management Company, mentions in an interview with Moneycontrol that there are various global and domestic events that could be potentially harmful to the market in FY24. These include the Russia-Ukraine situation, fluctuations in oil prices, the US Fed's actions on interest rates, India's general election in 2024, and corporate results.
With more than 26 years of experience in the mutual fund industry, Nilesh Shah says Kotak Mahindra AMC may look at increasing exposure to sectors like Banking and Financial Services, Consumer Staples and Durables, and Manufacturing for FY24.
These sectors are expected to benefit from government spending, China plus one strategy, and India's long-term growth story, potentially leading to market outperformance, he feels.
What is your take on RBI monetary policy?
The RBI's pause is like Sachin's stroke on a tricky pitch but with eyes set on and having the luxury of hitting the ball wherever he wanted. The RBI had the option of a rate hike or a pause. The pause was not entirely unexpected.
The RBI will watch developments and data before taking the next call. The market expects the RBI to fetch maximum run and win the match on inflation and growth, no matter which direction they hit the ball.
After a lot of volatility in FY23, what is your view on equity markets for FY24?
The equity markets for FY24 may continue to experience volatility due to various events. In the short term, FPIs might book profits and move into cheaper markets like China, Taiwan, Korea, etc as India’s market is at a significant premium to all other markets.
Also read:Â Lenders likely to post robust numbers; PSBs' profit may touch Rs 1 lakh cr in FY23
However, India's long-term growth story remains intact. It is important not to chase momentum in this market and maintain a balanced approach. Investors should stay invested, use market corrections as opportunities to invest, and participate in India's growth story.
Fundamentals remain strong, and domestic investor sentiment is robust, which could eventually attract foreign investors. At the current juncture, a neutral weight allocation to equities is recommended. Investors should use market corrections as opportunities to increase equity allocations, rather than chasing momentum.
What are the big global and domestic threats for the market in FY24?
Several global and domestic events could pose threats to the market in FY24, including the Russia-Ukraine situation, fluctuations in oil prices, the US Fed's actions on interest rates, India's general election in 2024, and corporate results. These events may cause market volatility and affect both domestic and foreign investors' sentiments.
Among sectors, where do you want to increase exposure for FY24?
We may look at increasing exposure in sectors like Banking and Financial Services, Consumer Staples and Durables, and Manufacturing for FY24. These sectors are expected to benefit from government spending, China plus one strategy, and India's long-term growth story, potentially leading to market outperformance.
Also read:Â Unseasonal rains, high-interest rates make auto industry cautious about growth prospects
Any emerging theme that you are closely watching?
The China+1 strategy is an emerging theme to watch closely. As global buyers diversify their supply base and companies migrate out of China, India's manufacturing base is expanding. This shift is expected to benefit India's manufacturing sector and contribute to the country's long-term growth story.
Are you super bullish on BFSI space?
The sector has experienced heavy FPI selling, but holdings are now at historically low levels. The banking sector's performance remains strong, with reasonable valuations, decadal low levels of NPAs, and expanding and stabilizing margins. It could be a sector to buy on the correction.
Do you really think a major global recession is unlikely in FY24?
The global economy is in a precarious position and as per IMF in 2023 around 1/3rd of the global economy may go into recession. The other 1/3rd is in India and China. Balance 1/3rd of who knows what numbers they are reporting. There are various global and domestic events that could impact market sentiment and cause volatility. It's essential to monitor these events and make investment decisions accordingly.
Do you see a big flow of IPOs in the second half of 2023?
The IPO markets are largely dependent on market sentiment. If the FIIs start returning to India backed by its fundamentals, the market sentiments will turn positive. This could see large participation in IPOs. However, if the sentiments remain low, the IPOs may not see much interest.
Do you think the SIP inflow graph will remain northward going ahead?
The SIP inflow has been averaging around Rs 13,500 to Rs 14,000 crore a month, and domestic investor sentiment remains robust toward India. The positive sentiment and India's growth story suggest that SIP inflows could remain strong going forward.
What are your broad expectations for March quarter earnings? Do you see major earnings downgrades than upgrades?
The December 2022 quarterly results were mixed. Earnings per share forecasts for Nifty50 have seen modest cuts, and it is expected that earnings will be revised downwards.
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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