Mohit Khanna of Purnartha believes Indian markets continue to remain in the Bull-run phase. The recent correction is transitionary and in fact healthy for the longevity of the Bull-run. Hence, "I do not see any issue of slowdown in the primary markets," the fund manager said in an interview to Moneycontrol.
According to the seasoned equity analyst, the breadth of businesses that are vying listing is also encouraging; quick-commerce, e-commerce platform, retailers, logistics, QSR, etc. are sectors that are likely to get listed next year. He believes this will keep primary markets vibrant and buoyant in 2025.
After the RBI policy, Khanna said the MPC’s 4:2 decision in favour of keeping the repo rate unchanged highlighted the fact that inflation-fighting remains RBI’s top priority, while India is likely to achieve the revised growth number of 6.6 percent. He holds more than 15 years of market experience.
Is the RBI interest rate decision on expected lines? What should the RBI do in the next meeting in February?
RBI MPC statement on December 6 was largely on our expected lines. The MPC’s (Monetary Policy Committee) 4:2 decision in favour of keeping the Repo rate unchanged highlights the fact that inflation-fighting remains RBI’s top priority. While RBI is expecting inflation to go below its 4.0 percent tolerance band only in Q2FY26, the GDP growth is expected to improve sequentially this and the next quarter. In my sense, we are heading to a situation where RBI would have to take a more focused balancing act between inflation & GDP growth in the upcoming MPC meetings. The Governor also pointed out that the high frequency indicators are pointing to resumption of GDP growth post Q2FY25 downward tick.
In respite to the Banking industry, RBI also decided to cut CRR (cash reserve ratio) by 25bps in two tranches that will be completed by December 2024 end. The CRR cut is expected to release ~Rs. 1.16 lakh crore liquidity into the Banking system. This will help banks to lower the cost of borrowing and should arrest the falling credit growth.
RBI’s decision in February will depend on inflation & GDP growth trajectory. It is too early to comment on that.
Is the economic growth of 6.6 percent achievable in FY25, though India remains the fastest growing economy?
It is likely that India would achieve the revised growth number of 6.6 percent. Due to their forward-looking nature, markets already seem to have adjusted themselves for a lower growth number. Even the RBI Governor pointed this out in his press interaction that the high-frequency data till now has been encouraging and suggests that GDP growth bottomed out in Q2FY25. Manufacturing subsectors like cement and mining are picking-up while services already continue to deliver well. Rural economy is also showing green-shoots. Thus, it is reasonable to work with an assumption that FY25 GDP growth number would be 6.6 percent.
Do you expect the competitive intensity to increase significantly in solar value chain?
China has a mammoth share in the solar value chain. India & the US have the maximum share of its consumption. Both the Indian and the US government are increasing efforts to ward-off Chinese solar goods. The whole value chain is affected from panels, modules, frames, cells & glass. In such a protectionist scenario, the Indian players are now in the sweet-spot. This indicates improved profitability and import-substitution as key themes in the near-term. Having said that, improving business fundamentals coupled with low entry-barriers could lead to heightened competition and eventually a supply glut over the medium-term, in my view.
Do you see value emerging in utilities and auto sectors?
There could be some headwinds in the near-term but the medium-term outlook is good. Therefore, I would ideally like the dust to settle before I start to search for value in both Utilities and 4-wheeler auto. However, the retail demand for 2-wheeler auto & tractors remains steady.
Passenger vehicle (PV) is also witnessing a cyclical slowdown. For the month of November 2024 PV industry-wide retail volumes declined 14.6 percent YoY. On the 2-wheeler auto side, we continue to remain upbeat and believe that as rural consumption is slowly coming back on track, momentum could continue for a while.
The utility companies continue to struggle with lower power demand even as renewable energy capacity is on-track. Due to poor demand, the PLF (plant load factor) for coal-based plants moderated to 69 percent in October 2024 as compared to 72 percent in October 2023 and there is no coal-based capacity addition YTDFY25. Additionally, GDP growth is now lower than previously expected. In such a scenario, I believe that there is risk to earnings in the coming quarters this fiscal year.
Will the primary market remain buoyant in 2025 as well?
Indian markets continue to remain in the Bull-run phase. The current correction is transitionary and in fact healthy for the longevity of the Bull-run. I do not see any issue of slowdown in the primary markets.
The start-up and VC investment phase that kicked-off in the last few years have ensured that India has enough candidates to list each year. The breadth of businesses that are vying listing is also encouraging; quick-commerce, e-commerce platform, retailers, logistics, QSR, etc. are sectors that are likely to get listed next year. This will keep our primary markets vibrant and buoyant in 2025.
Are you still concerned about earnings growth? Will the overall earnings growth below 10 percent for FY25?
Yes, earnings growth remains a near-term risk for the markets. Earnings in the 1HFY25 have disappointed for various one-off reasons, which has increased expectations for the 2HFY25 to deliver.
Overall, my expectation is that 2HFY25 should deliver a sequential recovery. However, I am not expecting a return of any big-bang QoQ growth. While the festive season was good which is being followed by a strong wedding season as well, the overall consumption growth is still tepid and Government’s capital spending is lagging targets.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
