Varun Goel, Senior Fund Manager, Mirae Asset Investment Managers (India), mentioned the euphoric part of the Indian equity market is over, and buyers ought to have extra affordable return expectations.
“The period from 2019 to 2024 was a great five years for Indian equity markets. We saw Nifty companies’ earnings grow 17-18% and Nifty compounded also 17-18%. Last year, Nifty companies’ earnings grew 2-3%and the market returns were almost negligible,” he mentioned in an interview.
“If you see, the 30-year average earnings growth for Nifty companies is around 10- 11%. Our view is that the next 3, 4, 5 years should also be inline with that. And similar earnings growth, similar kind of returns,” Mr. Goel mentioned.
“But it does not mean markets will not give returns. It means we should moderate our expectations,” he mentioned.
Mr. Goel mentioned this 12 months Nifty firms’ earnings are anticipated to grow10-12%, whereas Small and mid cap firms can develop quicker.
“We believe this is a year for cyclical recovery in India. Interest rate-sensitive sector should see better growth. We are positive on all the India facing sectors,” he mentioned.
“Normally, interest rate cuts take 6 to 9 months to have their impact on the economy. So, I think by September-October, you will start seeing the impact of that,” Mr. Goel mentioned.
He mentioned fee cuts and the reduce in private revenue tax alongside the proposed GST fee cuts will play their position in boosting short-term financial development.
“GST cut, if it happens the way it is being talked about we will see sectors like auto, auto ancillary, consumer durables, building materials will benefit,” Mr. Goel mentioned.
“There are certain themes which would be interesting- solar energy, wind energy, the whole component ecosystem, electric vehicle sector, electronic manufacturing services. There is a lot of scope for bottom-up stock picking in the small cap space,” he mentioned.
“Small caps are inherently more volatile, and sharp corrections are part of the cycle. Historical trends show that when macro and sentiment-related headwinds ease, this segment tends to rebound strongly,” Mr. Goel mentioned.
“We are cautious on the export outlook. But some sectors like pharma contract development and manufacturing (CDMO) should do well,” he mentioned.