"The fillip provided to re-ignite the manufacturing sector given its domino effects on employment and the MSME segment should be a big catalyst for the economy," Jitendra Sriram, Senior Fund Manager at Baroda BNP Paribas Mutual Fund said in an interview Moneycontrol.
He believes utilities, industrials and part of auto segments could lead the market rally in FY25.
Baroda BNP Paribas Mutual Fund has been steadily reducing its underweight stance on agrarian plays which was largely the stance for the last 3 quarters, said Jitendra with more than 25 years of experience in investment research and portfolio management services. "We are currently on a wait-and-watch mode on when to go overweight the space at this point."
Do you think the market will hit a new high, immediately after general election results, though there is a rangebound trade now?
In our view, under the scenario of a status quo of policy continuity, we believe the market will largely be rangebound although the initial reaction may be positive and await the first Union Budget of the new government to draw cues finally.
Given that valuations aren’t rich, they may largely track earnings growth hereon. In the event of any change, nervousness may cause some intermediate pullbacks for markets to re-assess thrust areas and focus of the Central Government.
Have you spotted any new opportunities among sectors, especially after recent corporate earnings?
The earnings season has been largely on track. However, there have been certain key takeaways. Firstly, the industrials space has been across-the-board margin pick up on the back of operating leverage and normalisation of commodity prices. We are witnessing in general an uptick to the earnings forecasts here.
Second would be areas such as IT wherein growth has been anemic, but margins have held up and the commentary has been one of a second half recovery.
Third would be chemicals/agrochemicals wherein the current quarter has been dismal, but managements are indicating de-stocking which lays the foundation of a possible recovery in the quarters ahead.
Digressing away from earnings, the other aspect has been the forecast of normal monsoons by both the primary forecasters – IMD & Skymet. This could lay the foundations for a rural recovery (eg FMCG, tractors etc) post monsoons.
Has the March quarter earnings season met your expectations?
As mentioned earlier, the earnings season has largely been on track. Up until the week ending May 11, almost 37 out of the 50 Nifty companies had reported and we saw 30 out of these 37 either being in-line or above estimates.
Overall, for Q4 the beat is on an average ~7 percent above street estimates. This indicates that the underlying demand drivers are intact. Elections could potentially hit the pause button on contracting for a quarter or two as no new tenders are typically issued post the Code of Conduct comes into play. (Source: Internal and Bloomberg)
Are you adding exposure to rural plays?
We are cognizant of the forecasts of a normal monsoon, and we have been steadily reducing our underweight stance on agrarian plays which was largely the stance for the last 3 quarters. We are currently on a wait and watch mode on when to go overweight the space at this point.
Whenever we decide there are enough pointers, to be reasonably certain, the price value equation then would dictate whether we make the exposure through staples (FMCG), Agri facilitators (tractors, crop chemicals etc or rural income plays (two wheelers etc)
Which are the sectors to be in a leading position in the market rally in FY25?
The post Covid rebound for the Indian economy has been swift. The tailwinds provided by policymakers by way of infrastructure spends (railways, power etc), Aatmanirbhar Bharat (import substitution e.g. defence) or PLI - production linked incentives; OSAT - outsourced semiconductor assembly & testing schemes etc should provide more wings to this rebound.
In our view the fillip provided to re-ignite the manufacturing sector given its domino effects on employment and the MSME segment should be a big catalyst for the economy. We believe utilities, industrials and part of auto segments could be leaders into the market rally in FY25.
Do you expect the midcap and small cap segments to remain expensive in terms of valuations in FY25?
Expensive or cheap always needs to be looked into the context of the growth. Optically on a trailing basis, the SMID (small & midcap) segments may look a little expensive, but these segments are also showing strong growth momentum. In general, the SMID space is more amenable to bottom-up stock picking, and we do believe that there are enough on the canvas by way of stock picking to deliver alpha.
Do you think the flow and demand for Retirement plans to increase in the years ahead?
Retirement as a theme is bound to pick up. India is currently a young nation but over time a large proportion of this young workforce will age and retire. In addition, we have seen that corporates and governments are veering away from defined benefit to defined contribution plans. Further aspirations and lifestyle are constantly on the rise. As these mega trends develop further, the retirement space promises to be a very interesting one for investors to augment their incomes with such offerings.
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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