S Naren, chief investment officer at ICICI Prudential Asset Management Company believes equities could see a sharp rise in value, also described in market parlance as a “melt-up”, in 2024 but in the near-term such a scenario is unlikely.
“We have can have a melt up in equities in 2024 which is the reason why we have been recommending SIPs and STPs,” Naren told CNBC-TV18 in an interview on April 7.
Naren warned that the next 18 months will be dominated by continuous interest rate hikes in the US and India as both the central banks look at staving off inflationary pressures on their respective economies.
The minutes of the US Federal Reserve’s latest meeting released on April 6 showed that some members were in favour of multiple 50 basis points hike in interest rates in order to rein in multi-decade high inflation in the US.
Further, Fed members highlighted that they are prepared to reduce their bond portfolio by $95 billion per month in order to tighten financial conditions. The US central bank had bought $120 billion per month in bonds between March 2020 and November 2021 to cushion the blow of the pandemic on the US and global economy.
That said, Naren is not concerned about earnings being impacted by piping hot commodity prices. Global commodity prices have soared over the past few weeks after sanctions were imposed on Russia, a major global commodity producer, following its invasion of Ukraine.
“Historically, we have seen inflation and earnings go together and we are in an inflationary environment so earnings are going to be good,” Naren said.
The veteran asset manager also displayed optimism for the real estate sector where he sees “long-term opportunities”. The mutual fund has recently launched a new fund offer for a Housing Opportunities Fund aiming to capitalize on a supposed upturn in the real estate market.
“Don’t expect prices going up in the real estate sector,” Naren said arguing that affordability in the sector has improved.
Naren sees huge potential in the telecom sector while he believes banks and automobile stocks are a contrarian trade in the current market. 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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