Daily Voice: TRUST MF sees pickup in FII inflows post Lok Sabha election results

TRUST Mutual Fund's CEO Sandeep Bagla

FIIs have been net sellers to the tune of Rs 1,19,254 crore in the equity cash segment in calendar year 2024. However, there is a distinct possibility of a pickup in FII inflows after the Lok Sabha election results are out on June 4, TRUST Mutual Fund CEO Sandeep Bagla and fund manager (equity) Aakash Manghani told Moneycontrol in an interview.

According to the duo, earnings for the March quarter have been quite robust, showing volume growth as well as healthy margins. "And the trend is likely to continue in the near future as well."

Edited excerpts from the interaction follow.

Do you think the market is confident enough about policy continuation after the general elections results are out?

There has hardly been any correction in the broad equity indices in India in spite of the global market volatility. While election results are difficult to predict, it appears that the markets are pricing in political stability and continuation of policy initiatives. One would do well to look out for any sharp changes in global liquidity or risk appetite, as after the election results these could be the important and dominating factors determining future market movements.

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Sandeep Bagla

CEO|TRUST Mutual Fund

Do you see a significant increase in FII inflows after the election results?

FII inflows into Indian equities are governed by multiple factors ranging from global liquidity, relative valuations and accumulation of profit in portfolios to the future outlook, currency outlook, and a host of other factors. FIIs have had a positive experience by making investments in India and there's no reason to believe that the inflows will not continue after the election results on June 4th. We do see a distinct possibility of a pickup in FII inflows into India once the election results are out.

What is your reading on the March quarter earnings? What do you expect from earnings for FY25, after reading the FY24 earnings?

Earnings for the March quarter have been quite robust, showing volume growth as well as healthy margins. The trend is likely to continue in the near future as well. We expect healthy growth in earnings in FY25 for the large-company set, as represented by the major stock indices, in the low to mid teens, on an aggregate basis. We believe that there is a confluence of positive factors that could lead to sustained and continued growth in profits of large companies.

Which themes will continue to outperform in FY25 in your view?

At Trust Mutual Fund , we believe India has multiple structural growth sectors that will do well not only in FY25 but also over the next 3-5 years. The themes that we are bullish on are manufacturing, infrastructure creation, premium consumption and financialisation of savings.

Within manufacturing and infrastructure creation there are multiple sub themes that will do well. Sectors such as Defence manufacturing, Automobiles, Pharma, Chemical, Textiles and Electronics, where India’s share of global manufacturing is low and there is a massive government impetus, shall do well.

In infrastructure creation, India is investing aggressively due to a huge demand surge in sectors such as Power, Railways, Ports, Roads, Airports, and real estate. We see good runway for the next couple of years in these sectors.

Are you bullish on multinational companies?

India has a plethora of listed MNCs across many sectors, such as automobiles, capital goods, chemicals and FMCG. The MNCs have been at the forefront of technological innovation, and over the years, have invested aggressively in creating a local resource base of talent and capacity. We are bullish on MNCs in select pockets of the markets, MNCs that are catering to sectors linked to infrastructure creation.

Should one stay away from the chemicals segment? Also, are you bullish on the agro chemicals sector?

The Chemicals sector was a massive wealth creator during 5-6 years pre-covid. India has some world-class chemical companies that have created a niche in the domain of speciality chemicals. The companies in these sectors have mainly benefited from the China +1 and Europe +1 themes over the past few years.

Companies have again gone into capex mode to take advantage of global supply chain shifts. However, over the past year, many of them have witnessed slower demand as the global economy is slowing down. We are bullish on this sector from a long-term perspective as India still has less than 5 percent of global manufacturing, leaving us with huge headroom to grow.

Is it better to invest in Flexicap funds, compared to others?

Today, equity investors in mutual funds have a plethora of choices ranging from largecap funds to smallcap funds and various combinations within. The flexicap fund category fund commands the largest corpus among all equity categories because it allows the fund manager to allocate across largecaps, midcaps and smallcaps, depending on the relative valuation and the future growth outlook of the fund manager. We, at TRUST mutual fund, continue to believe that flexicap funds are perhaps the best category to invest in as they give the portfolio management manager maximum room to manoeuvre.

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