“In the next bull run, I guess that NBFCs might perform well. Fundamentally, upside potential is a minimum of 15% to 20% in most of the NBFCs,” says Shrikant Chauhan, Head of Equity Research, Kotak Securities.
In an interview with ETMarkets, Chauhan said: “If the interest rate cycle starts turning downward in the 2nd quarter of FY2024 then there could be a specific buying interest in the sector,”. Edited Excerpts:
Markets have started picking momentum after the initial fall despite geopolitical concerns. What is your take on markets?
Shrikant Chauhan: Post some dip in March 2024, the equity markets have regained momentum. India’s macro-economic data points like GST collections and manufacturing & services PMI have been healthy.
Furthermore, India’s latest CPI inflation reading showed moderation as compared with previous month. In line with expectations, the RBI MPC kept repo rate and retained its real GDP growth projection of 7% in FY25.
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As per the IMD, India is expected to have an above normal monsoon season (106% of the long period average) and that can boost the rural economy.
In the near term, market participants will watch out for the outcome of the general elections. With Q4FY24 results season underway, stocks will continue to react to financial performance and management commentary.
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What is your take on the March quarter earnings? What is the sense you are getting from the management commentary?
Shrikant Chauhan: Sectors like automobiles & components, banks/diversified financials, gas utilities and pharmaceuticals are expected to report a YoY increase in the net income.
On the other hand, sectors such as metals & mining, oil, gas & consumable fuels could witness YoY decline in net income.
Many companies have declared dividends post March quarter results which suggest they are making profits. What are your views?
Shrikant Chauhan: Generally, most of the dividend paying companies declare dividends along with Q4 results. Companies posting earnings growth and healthy cash flows continue to reward shareholders through dividends.
We have seen many stocks turning multibaggers in FY24 – but as we know leaders change in every cycle. Which sectors will lead the next bull run in the markets?
Shrikant Chauhan: Yes. In the next bull run, I guess that NBFCs might perform well. Fundamentally, upside potential is a minimum of 15% to 20% in most of the NBFCs.
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Where to look for new opportunities in this expensive market?
They have a strong track record over the last several years in terms of fundamental parameters. If the interest rate cycle starts turning downward in the 2nd quarter of FY2024 then there could be a specific buying interest in the sector.
Will you see FIIs flows increasing post-election results? Or the results do not have any bearing on the FII inflow, but central banks rate structure will drive the decision?
Shrikant Chauhan: The decision to increase Foreign Institutional Investors\’ (FII) inflows should depend on the central bank\’s rate structure, which, in turn, relies on the economic data in the US.
If the inflation rate begins to cool off, it could increase the likelihood of the central bank changing its stance from keeping the rate higher for longer.
What would advise Gen Z someone who was born in the year 2000s and has started working? How should they start building the portfolio?
Shrikant Chauhan: Our advice to young investors will be to follow the principle of asset allocation. This will increase awareness of multiple asset classes. However, the allocation towards equities should be higher than any other asset class.
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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
