Santosh Joseph, the founder of Refolio Investments and Germinate Investor Services, predicts that in the fourth quarter of FY24, there will be muted earnings from the consumption side. However, he believes that in FY25, there will be an excellent opportunity to enter the consumption sector. In an interview with Moneycontrol, the financial services professional, who has over 20 years of experience in asset management, banking, and insurance, advises caution when it comes to the valuations of the defence and railway sectors, even though they hold a lot of promises for the future.
Do you expect the consumption space to deliver weak earnings in the last quarter of FY24? But will the FY25 be a better year for the space?
We may experience lower earnings from the consumption side in the fourth quarter of fiscal year 2024. Although the macro economy and GDP are showing robust numbers, the consumption side is struggling. We cannot predict when this situation will improve.
For the economy to perform well, consumption and even domestic imports must increase. Although global demand is rising slightly, domestic demand remains low. It is time for the consumption sector to turn around.
Usually, sectors remain quiet for one or two quarters before they show signs of improvement. As we move into fiscal year 2025, this could be an excellent opportunity to enter the consumption sector.
Do you think most of the positive triggers are already priced in by the defence and railways segment? Does it mean the upside is limited going ahead?
As far as the positive triggers of both the defence and the railway sectors, the biggest order book is placed by the government.
However, it is important to consider the nature and extent of this demand. Currently, we are only meeting existing requirements, and there is potential for further growth in both sectors. However, it is uncertain whether the growth will continue at the same pace as in the past due to the government's upfronting and frontloading of orders. To keep these sectors thriving, there needs to be more support at both the macro and micro levels. While both sectors show promise for the future, it is important to exercise caution when evaluating their valuations.
Do you expect India's allocation in global emerging market (GEM) funds to increase significantly in the coming years?
India’s allocation to Global Emerging Markets is bound to rise significantly. Not to forget that at some time during this year, we also have Indian bonds included in the Global Emerging Index. Likewise, increase in allocations to equity as our Indian GDP keeps rising and the total activity and volumes in our markets keep rising.
There will be increased weights in the Global Emerging Markets, and India will find a meatier place almost every year till we find a true representation of the Indian economy on the global scale.
What do you expect from the Monetary Policy Committee next month?
I don’t think we are going to expect anything surprising. They will be in line with the global market view, and it will also be in line with what the Fed likes to do.
Do you expect technology companies to cut down their FY25 growth forecast next month when they announce Q4 and FY24 earnings?
We may not straightaway see an earnings cut at a macro level but it will be interesting to watch the commentary and the narrative by all these tech companies.
It is not going to be a unanimous earnings cut across the sector, it is not going to come in one go, and it may spread over 2-3 quarters of this earnings revision.
Most experts feel the froth has been removed from the broader markets after recent correction. Do you agree?
The market has been in a prolonged upward trend, but the past 6-7 weeks have seen some consolidation, correction, and cooling off. This has removed some of the excess enthusiasm, although not entirely. As a result, not everything is now a buy or a sell. The shake-up has created an opportunity for good companies and sectors to gain a fair share of the market.
Such shake-ups are healthy for the market as they help to remove the excess froth and bring back balance. This is a good reality check for new investors to avoid falling prey to high market levels. It is important to recognize that markets work both ways, and sanity must be restored from time to time.
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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