Market outlook: Tempted to take some money off the table now, says Mirae Asset's Rahul Chadha

Over the next six to nine months, there are indications that the balance sheet will contract: Rahul Chadha

Rahul Chadha, Chief Investment Officer at Mirae Asset Global Investments, provides insights into his near-term market outlook and explains his decision to take profits off the table as the bulls dominate Dalal Street.

Edited excerpts

Are we at a point where it's wise to reduce investments or do you believe we're just getting started with growth?

We have always been positive about the market's potential, especially with the recent upturn that has benefited our portfolios. We still have a favourable outlook for India and remain overweight in the market.

However, in recent days, we have decided to take some profits off the table, particularly in the mid-cap sector. While these companies have strong fundamentals, their prices have become excessively inflated. Therefore, it is prudent to take some caution and reduce exposure in these areas.

Are there any specific areas within the mid-cap space that concern you?

Over the next six to nine months, there are indications that the balance sheet will contract. Unlike the previous period, where there was significant expansion, we anticipate a tightening of liquidity. This, along with potential rate hikes, may put pressure on the Indian rupee. Additionally, as domestic liquidity tightens, we may witness a slowdown in certain sectors. These factors, combined with global developments, such as the Federal Reserve's balance sheet adjustments, could lead to a contraction in market multiples.

How are you approaching the IT sector? 

While it's true that the IT sector is facing headwinds, if the US experiences a shallow recession over the next six months, it could present an opportune time to accumulate IT stocks. We are also monitoring the situation in China, where the People's Bank of China is undertaking significant balance sheet expansion. Given the historical linkages between China and India, it's highly likely that the Indian rupee will weaken. From a hedging perspective, this could provide a good opportunity. However, it is crucial to take a medium-term view, around 12 to 18 months, and expect improvement in the US economy and growth momentum in the sector.

What are your thoughts on recent developments in the two-wheeler space, specifically with the launch of Bajaj and Hero Harley in the premium segment?

The incumbent players such as Eicher may experience pressure on their margins as they are forced to offer more features or discounts to compete with the new entrants. If they do not adapt, they may even lose market share.

This pressure is already evident, as reflected in the stock prices. However, taking a medium-term perspective of three to five years and considering the potential growth in the premium segment, I believe there is room for multiple strong players.