Daily Voice: This CIO expects up to 15% earnings growth in Q4. Here are his picks

Alok Singh is the Chief Investment Officer at Bank of India Investment Managers

The Lok Sabha elections are a major market event but Alok Singh, Chief Investment Officer, Bank of India Investment Managers, thinks markets don't appear much worried about them as they continue to trade near record highs.

Singh is positive about public-sector enterprises and said some of them are well placed to take advantage of the growing economy and would continue to deliver better financial performance.

Singh, who has spent over 20 years in fund management, told Moneycontrol in an interview that the sectoral trends of the December quarter would continue in the January-March period as well. Edited excerpts:

Do you think the banking sector is oversold?

In the last year, Nifty Bank underperformed the Nifty 50 mainly because some banks with large weights in the Nifty Bank index have not done well, and there are clear reasons for such underperformance. At the same time, PSU banks have witnessed a good rerating mainly because of their good financial performance. So, we don’t think that banking is oversold at this point.

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Alok Singh

Chief Investment Officer|Bank of India Mutual Fund

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Will the market turn cautious ahead of the general elections and remain range-bound?

Equity markets always witness phases of consolidation or sideways movements. Most of the time, such phases are triggered either by recent run-ups or because of changes in the macroeconomic environment. Though an election is a major event, it's a recurring event with a very uncertain outcome. Currently, markets are near all-time high levels and don't appear to be much worried about the election.

Also read: How will higher US inflation affect Indian markets?

Do you expect the government to increase capital expenditure on infrastructure in its full budget in June-July?

If the same government continues post-election, then we don’t think that the GoI will be looking to increase allocations towards capital expenditure.

Are PSU stocks overvalued? Should one pick these stocks on correction?

PSU, as a theme, has done very well in recent times. This rerating was triggered by an improving business environment, which resulted in better financial performance. While the business environment continues to improve for most of them, in a few cases, the stock price action has been much ahead of the business fundamentals.

Other than those, we remain constructive towards public-sector enterprises. Some of them are especially well placed to take advantage of the growing Indian economy and such businesses will continue to deliver better financial performance.

Also read: Rakesh Jhunjhunwala's close aide spells out Big Bull’s advise now

The December quarter earnings season ends this week. Any major disappointment? Have the results been in line with your expectations?

The result season, so far, has been along expected lines. We haven't witnessed any major disappointments thus far. Revenue and profit growth for companies in our universe were broadly in line.

In general, profit growth was strongest for oil, PSUs, construction materials and autos, while technology was the only sector to report a decline in profits.

What do you expect from the March quarter earnings season?

We expect the sectoral trends of the December quarter to continue in the March quarter as well. Overall, we are expecting 13–15 percent earnings growth going forward.

Your top themes for FY25...

Sectors like finance, auto, capital goods, healthcare and real estate have done quite well, so far, in FY24. We expect that their profit pools may continue to expand in FY25. PSU companies, though operating in multiple sectors, may continue to get good support from government policies and buoyancy in the economy.

What is the strategy behind your multi-asset fund?

The Bank of India Multi Asset Allocation Fund is designed to have lower portfolio volatility because of its higher allocation to debt. At the same time, the fund will have exposure to equity in the 35–40 percent range. Debt exposure will be in the 45–55 percent range. Gold exposure through ETFs will be in the 10–15 percent range.

The fund can also invest up to 10 percent in listed REITs and INVITs. We believe that this asset allocation ensures diversification in the portfolio and lowers portfolio volatility. This will help investors tide over market volatility and minimise investment risk. The low volatility of the portfolio increases the propensity of investors to hold on to their investments for long periods, which, in turn, results in better accretion because of the compounding effect.

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.