"We expect RBI to wait till August policy before changing its current pause stance," Shailendra Kumar, Chief Investment Officer and co-founder of Narnolia Financial Services said in an interview with Moneycontrol.
By August this year, clarity will emerge on monsoon, government borrowings, and US FED stance, he feels.
Shailendra, who has more than two decades of experience in the fund management and investment advisory, does not expect the outperformance by small companies to continue this year (2024) as the valuation of small-cap space has become stretched.
In an absolute sense, most of the small-cap companies are trading above their normal valuation range, and this year it is better to have higher exposure to large-cap companies, he said.
Do you expect Indian IT services companies to retain their global domination despite AI disruption?
Indian IT services companies during its evolution over the last 30 years have built strong and scalable moat. No other country in the world has the availability of a quality workforce to challenge Indian IT services companies. Also, these Indian companies have exhibited the ability to continuously upgrade from application development to consulting to digital.
Artificial intelligence (AI) is the next big opportunity for Indian IT services companies. Nearly 5,000 AI patents have been filed in India in the last 5 years. 40 percent of these patents have been filed by Indian companies. Ecosystems for emerging technologies including AI are being built in India at a faster pace and Indian IT services companies are both enablers and beneficiaries of this trend.
Do you think there will be continuation of huge transfer of savings from bank deposits towards equity markets in coming years?
Indian savings going more into the equity market and less into bank deposits is a recent phenomenon. Earlier bank deposits had a very high share in savings in India. Indian household savings in the equity market are still in the single digits only and have substantial headroom to grow from the current level.
Also, it is growing at a moderate gradual rate and does not pose any threat of a bubble shortly.
Which are the sectors looking attractive now considering the expected enormous growth in FY25?
Sectors related to government capital expenditure will continue to do well in FY25. Companies involved in infrastructure work, defence production, and electronics manufacturing will report strong earnings growth in FY25. Auto and retail companies look attractive in the consumer space.
Among the external sector, pharmaceutical companies should start showing decent growth with expanding margins.
What do you expect from the commentary by RBI Governor Shaktikanta Das in the first monetary policy meeting of FY25 scheduled next week?
We expect the RBI to keep the policy rate unchanged in the upcoming monetary policy meeting. Recent actions by the RBI in the money market suggest that RBI is getting comfortable with easing.
The weighted average call rate has fallen below the repo rate after remaining higher for the last 6 months. We expect RBI to wait till August policy before changing its current pause stance. By August this year, clarity will emerge on monsoon, government borrowings, and US FED stance.
Do you think the market will consolidate till the general elections and the major movement on either side will take place only post general elections results?
India market at this point is primarily tracking the global economic recovery and the movement in the interest rate. While there is no structural risk to the long-term trend of the market, after the sharp rally of 2023, the market should stay sideways for some more time. We can expect higher volatility as we approach the election result date.
Will the smallcap space continue to outperform despite intermittent profit booking?
We do not expect the outperformance by small companies to continue this year as the valuation of small-cap space has become stretched. Higher earnings growth for small-cap space will continue this year too but unlike early 2023 when small-cap companies were trading at a big discount to large caps, now they are trading at a premium.
Also, in an absolute sense most of the small-cap companies are trading above their normal valuation range. This year it is better to have higher exposure to large-cap companies.
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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