Sneha Poddar, Associate Vice President at Motilal Oswal Financial Services Limited (MOFSL) is positive about the prospects of the Indian market. In an interview with MintGenie, she said one can bet on financials, auto, industrials, capital goods, infra and cement for a one-year perspective while in the near term, one can look at defensive sectors like FMCG and pharma.
What is your outlook for the markets for the current financial year? When do you expect the persisting concerns over the rate hikes, economic growth and geopolitical tensions to end?
We believe we are in the last leg of the rate hike cycle and the central banks across may soon take a pause. RBI has already taken the first step and did not hike the rates in the last MPC and may pause from here.
The impact of a rate hike might be seen on earnings for the next one-two quarter but cool off in commodity prices would limit the damage.
Moreover in FY24, we expect strong earnings growth of more than 15 percent – largely on account of the low base of 11 percent growth in FY23E and improving margins.
This is likely to be further supported by demand revival which had moderated since Q3FY23.
We can expect markets to deliver 12-15 percent kind of returns over the next year as the long-term outlook remains buoyant backed by strong domestic fundamentals and a robust earnings outlook.
Sensex and Nifty are significantly down from their respective highs. Can we see them hitting fresh highs in the next six months? What could be Nifty's level in the next six months?
Due to moderate earnings growth in FY23 and global uncertainties, Nifty witnessed time correction over the last 18 months while hovering around the 17,000 mark.
However, valuation came off substantially from 24 times one-year forward P/E (price-to-earnings ratio) in Oct’21 to 18 times currently (versus 20 times long period average), offering a moderate margin of safety.
Further, while the RBI has raised rates by 250bp, the 10-year yield has increased by nearly 50bp in FY23.
We believe the relative equity versus bond valuations, too, is now far more conducive than at the beginning of FY23.
Given this backdrop, Q4 earnings and management commentary would hold importance, especially amidst global uncertainties which could keep the market volatile in a broad range over the next six months.
Investors prefer sticking to the large caps during market uncertainty as they are not as volatile as the mid and small caps. Would you say it is time one should completely avoid mid and small-cap space?
Over the last 12 months when global concerns heightened, large-caps and mid-caps remained resilient with Nifty down by one percent, while Nifty Midcap 100 was up one percent.
On the contrary, small-caps bore the major brunt and declined by 14 percent.
Now with the rate hike likely to end soon and earnings momentum expected to pick up, we can expect a sharp reversal in small-caps too.
Thus, one can look at small and midcap stocks on a selective basis where there is robust earnings growth delivery while valuations are also reasonable.
Which sectors can make the most money in the next one year? Should one bet on growth stocks at this point?
During the higher interest rates regime, growth stocks suffered the most – especially the stocks that disappointed in profit expectations and those with long-duration cash flows.
Value stocks on the contrary made a comeback as a theme.
Going ahead with growth expected to pick up once again, we believe growth at reasonable valuations will be the theme to generate returns in FY24.
From a one-year perspective, we are positive on financials, auto, industrials, capital goods, infra and cement.
In the near term, one can also consider defensive sectors like FMCG and pharma to navigate the volatility amidst an uncertain environment.
Most retail investors are losing money in this market. What should be the trading strategy in a volatile market? How to make money when there is so much uncertainty on the market and economic front?
The market has been very volatile over the last year wherein it juggled a broad range. In such cases, retail investors tend to lose money.
Traders in such a scenario should have a cautious approach and should not get aggressive.
Investors on the other hand can take advantage of this volatility and add stocks whenever the opportunity presents itself from a long-term perspective.
They should identify the growing sectors and good quality stocks within them which hold the good potential to build a quality portfolio.
Once the portfolio is built, one needs to sit patiently and not panic in case of non-performance.
There is too much free info and advice on social media. How can retail investors make prudent investment choices amid a plethora of free information? What are some key do's and don'ts?
In today’s world, too much free information and advice are available on social media which mostly confuses retail investors and ultimately results in wrong decision-making.
As we all know too much information can be dangerous as the valuable information then tends to get lost.
So in a such scenario, a retail investor should identify the sources that work for him and just concentrate on them.
Further, one should not blindly believe the advice or info and should cross-verify or do his own analysis too to build conviction.
One needs to check the authentication of those sources too. From the sources identified, one should build his own strategy that works for him.
Disclaimer: The views and recommendations given in this article are those of the expert. These do not represent the views of MintGenie.