Daily Voice: This investment veteran explains why he is bullish on power, biased towards technology leaders in equipment space

Let’s split the market into large, mid and small cap companies. When it comes to large cap companies, the market is close to fair value but not overvalued. During bull markets, investors tend to move to a range higher than fair value. Hence, there is still upside potential in the large cap category. In the mid and small cap categories, valuations are higher by 20-25 percent compared to their historical range and hence we see some chances of correction here.

Do you see a huge opportunity for growth in the power sector?

We are very bullish on the power sector. Global power consumption is likely to rise significantly driven by a massive increase in data centres and a shift towards electric vehicles. India will also add significant generation capacity in thermal and renewable energy. Also, the government has planned a significant boost for the transmission sector to strengthen the grid.

All this will be hugely beneficial to companies in the capital goods, industrials, utilities as well as transmission and distribution (T&D) sectors. We are biased towards companies that are technology leaders in the equipment space.

Which are the sectors look attractive for investment especially after reading the March quarter earnings?

Infrastructure and capital goods are likely to continue delivering good numbers. Sectors like defence and railways have performed well due to government initiatives. We are looking at the banking and consumer staples sectors positively in the coming year as we see a revival in growth. Internationally linked sectors like technology, metals and chemicals may show improvement in revenues and profits by the end of the year.

What do you expect from the year FY25 in terms of earnings? Further, will the FY25 earnings season be better than the fiscal year gone by?

We expect healthy growth in FY25 as well as FY26 earnings. Currently, we estimate the Nifty 50 index to register earnings of Rs 1,096 in FY25 and Rs 1,244 in FY26. We anticipate more broad based growth in FY25 and FY26 compared to the previous year. However, the growth rate may be slightly lower.

Do you see any segment where the government should focus on for the next five years?

The government has done an excellent job of increasing allocation to capex and also incentivising private sector to participate in the capex story. The government has also well laid out the path towards fiscal consolidation in the coming years. A lot of work has also been done in the social sectors, and I believe they will continue to focus there.

Do you think one should increase exposure to PSU stocks especially if there is a favourable general elections results?

PSUs as a category include a variety of businesses, and not all of them may follow the same trends. However, it is possible that after a favourable outcome in the elections, the PSUs stocks may react positively together. As a long-term investor, one should not generalise all PSU businesses together but evaluate each one separately before making a decision. We have invested in some PSUs which fit into our megatrends strategy in the Flexi Cap Fund.

Is it the right time to have exposure to Multi Asset Allocation Fund?

We are positive on the fixed income market and expect interest rates to trend down from here. In this Multi Asset Allocation Fund, we will be able to lock in a good yield and also seek to benefit from capital gains when interest rates start moving down. We also have a positive outlook on gold. Gold serves as a good hedge against any fall in the equity market and rupee depreciation. We will create a portfolio of “Growth + Dividend Payout” stocks for equities.

Typically, such an equity portfolio can reduce volatility, minimise the impact of drawdowns and is currently also available at reasonable valuations. When we combine these into a tax efficient structure, we believe we have created an attractive investment proposition for investors for the long term.

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