Indian markets have a longer runway with strong domestic growth. Nifty may reach 21k by year-end. Opportunities in the mid-cap segment with a focus on domestic consumption, financials, real estate, and IT. Themes for the year include manufacturing, IT sector recovery, and profitable growth in startups, said Niket Shah, fund manager at Motilal Oswal AMC in an interview with Livemint.
US Inflation is cooling off, the dollar is falling, geopolitical issues persist, and central banks may announce a hike for the last time. How do you read the global macro situation at present?
The current global environment is a kind of goldilocks for equities. This is because inflation is easing, to some extent led by increasing supply. This is providing room for central banks to pause. At the same time, growth is still holding up. Hence the current setup is ideal for a country like India where domestic growth momentum is still strong and with a more calmer global environment, domestic markets could have a longer runway.
What are your year-end targets for Nifty, Sensex?
Given the sharp rally in FY24 so far, further upsides in the near term might be limited. Nonetheless, a pause might be welcome as it prevents a valuation bubble from developing. However, we should see a pre-election rally starting post-October which might take nifty to 21k by the end of the year.
The mid-cap segment has gained a lot of traction in the sense that the current market rally is broad-based. What is your outlook for the segment? Are there more opportunities left in the space or have the prices already peaked?
The mid-cap segment has gained a lot of traction in the sense that the current market rally is broad-based. What is your outlook for the segment – are there more opportunities left in the space or have the prices already peaked?
In a growth economy like India, there are always opportunities. While valuations have run up in some places, there are still abundant opportunities linked to domestic consumption, financials (Credit growth continues to remain strong), real estate (interest rates likely to come off next year), and IT (global recovery next year). The growth in these spaces is just taking off and valuations are still reasonable.
What themes to focus on this financial year?
Manufacturing should do well driven by massive capex driven by govt spending (rail, defense etc). Also, private capex is likely to accelerate over FY23 driven by higher capacity utilisations leading to fresh capex as well as PLI opportunities which require fresh capex.
IT – The IT sector has not participated in the last 18 months as valuations were very high as well as growth rates have been slowing as compared to what we saw immediately post covid era. We however believe that the growth rates are likely to bottom out in Q1 and accelerate once again post Q3 Onwards. Interest rates are also likely to come off next year which should benefit this sector going forward.
Startups– Most of the startups when they came for IPO were loss-making with no visibility of profitability in sight. However, this has changed over the last 12 months. Most start-up companies are now talking about focusing on profitable growth. Again with interest rates coming off next year, this space should benefit as well.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 20 Jul 2023, 01:27 PM IST