The next couple of years are likely to be packed with a lot of global and macro events which will inject some bit of intermittent volatility, but these shouldn't be a concern for long-term investors, stated Mrinal Singh, chief executive officer and chief investment officer, InCred Asset Management.
In an interview with Business Standard, Singh advised investors to incrementally allocate towards equities as he thinks valuations have returned to normal levels.
"We are seeing signs of improvement across macro indicators like moderation in inflation and interest rates expected to have peaked. This is a very healthy and fertile market for long-term investors, especially as the valuations have returned to normal levels. Investors should look to incrementally allocate towards equity from a medium-to-long-term horizon," he said.
Talking about the earnings season, Singh noted that the March quarter earnings have been a mixed bag. While technology companies have disappointed vis-à-vis expectations, sectors like manufacturing, healthcare, cement, and two-wheeler auto space have fared better in terms of volume growth, he mentioned.
He further observed that there are green shoots of recovery in rural demand, which is likely to benefit rural heavy consumer staples and two-wheelers for instance, adding that the input cost moderation bodes well for manufacturing companies.
Going ahead, Singh believes that earnings are expected to see mid-teens growth during the FY24-FY26 period as moderating inflation should have a positive rub-off on the earnings trajectory during upcoming quarters.
He is particularly bullish on healthcare, manufacturing, and rural-focused companies, which may see better demand during the festival season particularly if the monsoon stays normal.
He also noted that the run-up in financials has been driven by improving asset quality, strong credit growth, and in the case of PSUs, the ability to rapidly transmit interest rate changes. However, businesses may have to over-deliver to be able to continue giving these kinds of returns, he warned.
While investing, the sector should not be a key criterion and stock selection should depend on the merits of the business, advised the expert.