The market rally is far from over, says Rohan Mehta, CEO and Fund Manager at Turtle Wealth, as the June quarter earnings will add fresh momentum to the upswing in the indices.
"There is a higher likelihood of witnessing more earnings upgrades than downgrades following the release of the June quarter numbers," the chief of the portfolio management service provider shares with Moneycontrol in an interview. "I do not believe that it (equity market) has reached its peak. We have emerged from a consolidation period of 24 months, indicating a potential for further growth."
Seasoned for over 17 years in the capital markets, Mehta feels some major players, particularly in the Nifty Bank index, are yet to scale their all-time highs and are still consolidating within a particular range, which suggests that there is still considerable upside potential in the market. He expects the Nifty50 to reach 21,000 in this calendar year itself.
Excerpts from the interview:
What do you make out of the provisional numbers announced by corporates before the final Q1FY24 earnings?
We believe that the provisional numbers will be positive. Sectors such as manufacturing, automotive, and public sector undertakings (PSUs) will pleasantly surprise the market with their performance. The delivery of these results is likely to align with market expectations that would indicate promising financial outcomes for these industries in the first quarter of the fiscal year 2023-24.
Do you see more earnings upgrades than downgrades?
Yes, for sure, I strongly believe that there is a higher likelihood of witnessing more earnings upgrades than downgrades following the release of the June quarter numbers. Companies that outperform expectations are likely to experience a rerating and an upgrade in their earnings outlook.
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The overall economic growth, along with impressive profit margins of companies, indicates a commendable performance, making it one of the best in the current decade. This positive trajectory suggests the potential for further improvement and growth in the future.
Do you think the market has made its top? What's the possibility of a 5-10 percent correction from here on?
I have analysed the market's performance and I do not believe that it has reached its peak yet. While there has been a significant rise of nearly 20 percent from the recent lows, when viewed in a broader context, the market returns have remained in single digits. Moreover, we have emerged from a consolidation period of 24 months, indicating a potential for further growth.
Some major players, particularly in the Nifty Bank index, have not yet reached their all-time highs and are still consolidating within a particular range. This suggests that there is still considerable upside potential in the market. Based on our analysis, we anticipate the market to reach 21,000 in this calendar year, indicating further room for growth.
What is your reading on the latest mutual fund data for June?
There is no doubt that the latest mutual fund data for June suggests that the mutual fund industry is poised for significant growth and development in the Indian financial sector. Whether through mutual funds, Portfolio Management Services (PMS), Alternative Investment Funds (AIF), or direct equity investments, funds are expected to experience substantial progress.
Given the limited avenues for ordinary individuals to earn returns, direct equities offer an attractive opportunity. With an average savings rate of 3 percent invested in equities, there is immense potential for significant growth and higher returns in the future.
Your take on the NBFCs and banks as the valuation gap has reduced between them...
The current scenario of the reduced valuation gap between non-banking financial companies (NBFCs) and banks is intriguing. While NBFCs have displayed notable growth, they faced challenges in the previous decade, with only a few exceptions. However, similar to the resurgence seen in the auto sector last year, the NBFC segment shows promising signals. There exists a significant opportunity within this segment, and the odds seem to be in favour of NBFCs.
Also read: This portfolio manager says below-par Q1 for key sectors can derail the rally
It would not be surprising to witness NBFCs outperforming the returns of the Nifty bank's next year, given the higher value relative to their prices. Considering the potential upside, NBFCs appear to be a preferable choice over banks.
Do you expect a lot of action in the primary market for the rest of the calendar year? Do you have a list of IPOs launching in the same period?
A significant amount of activity in the primary market is expected for the remainder of the calendar year. There are several IPOs in the pipeline waiting to enter the main markets, which makes the market outlook quite interesting.
However, one concern with IPOs is that they often come with high valuations. In comparison, listed companies may offer better valuations and potential returns compared to new IPO companies. Therefore, it is crucial for investors to carefully evaluate the investment prospects and consider the available options before participating in IPOs.
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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