In an interview with ETMarkets, Pandey said: “Higher Yield has potential to derail equity rally globally including India, but strong dollar is good for certain sectors like IT/Pharma and Textile on Indian perspective” Edited excerpts:
Thanks for taking the time out. After a turbulent October we are witnessing a volatile November. What is your take on markets?
Market becomes jittery because of 2 reasons Macro uncertainty and Earning miss , both has affected our market in the last 30-45 days.
More than 50% of Nifty50’s companies have reported below consensus numbers hence the possibility of 3%-5% earning cut for FY25E/FY26E.
Second attractiveness of the Chinese market (sub 10x 12m F PE) compared to India at (23x12m F P/E) and obviously US election positioning (EM to DM shift) has led to macro uncertainty for FII.
How do you see the outcome of the US Presidential Elections and its potential impact on Indian markets as well as sectors in particular?
Trump will be second time US president , hence his policy tilt are known to market e.g. Higher tariff for import , make in America and broad based anti-migrant policies.Higher Tariff for Import historically leads to Inflation in USA because no ready capacity available in USA , which directly/indirectly will lead to Higher US10Y yield and strong dollar. Higher Yield has potential to derail equity rally globally including India.However, a strong dollar is good for certain sectors like IT/Pharma and Textile on Indian perspective.
How should investors take the outcome of the US Fed meeting? What is the kind of rate trajectory you see for the rest of FY2024-25?
As mentioned above, despite US FED rate cut , US10Y has not corrected much except one short term blip to 3.75% , while inflation remains sticky hence we do expect a 0-25bps rate cut in the next FED meeting. As per our understanding we are higher for longer zones specifically for global bond yield and Inflation.
What are the queries that you are getting from your clients?
Surprisingly HNI were in cash and less leverage since the last 4-6 months , hence we are getting queries on new ideas to deploy that cash.
Earnings season has not been that robust compared to the kind of valuations we are trading at. Do you see some more stock-specific consolidation before a constructive trend can emerge?
Yes , 2QFY25 earning season was very weak , more than 45% percent of companies have reported below estimate numbers. On consolidated basis 1HFD PAT growth is just 2% while asking rate is 8% for FY25E growth compared to FY24 for Nifty50 PAT, which suggests a likely downgrade in both FY25/FY26 earnings.
While NIFTY50 is still at a reasonable zone at 23x PE , SMID are trading at 30x multiple which is pretty high compared to historical average of 17x-18x which suggest stock specific correction first and then consolidation.
FII selloff was more than Rs 1 lakh cr in October. A part of it moved to other EMs, data showed. How is India placed among global peers? Do you see this as a trend going forward?
INR 1 lakh cr Sell off is surprising for us as well , however if you compare to other EM , India has delivered consistently above 14%-15% earning growth hence India still provides sustainable long term growth.
Which sectors are looking attractively priced at current levels?
As mentioned above IT / Healthcare / Textile and certain domestic themes like Energy transition look good to us. However EMS/Defense does need some more correction before we start looking at these themes.
What is your take on yellow metal and Silver which is also making headlines?
Historically global unrest leads to higher gold and silver prices , however this time an additional twist has happened to this theory.
Look at Chinese data, since the last 12-14 years Chinese equity market return are practically 0% , adjusted for inflation its in negative territory, while another asset class which is Real estate has also given negative return to household in China hence there is large buying happen in last 2-3 years from Chinese household and central banks in gold , too some extend Russian central banks are also aggressive buyers of Gold. All things put together has leads to massive rallies in both Gold and Silver in the last 4-5 years.
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