In an interview with ETMarkets, Bolinjkar said: “Silver, too, is expected to rise in value, driven by its extensive industrial applications, particularly in solar modules and batteries” Edited excerpts:
Thanks for taking the time out. After a turbulent October we are witnessing a volatile November. What is your take on markets?
The Indian market remains under consolidation as FIIs continue to exert selling pressure, largely due to concerns over weak corporate earnings and premium valuations of Indian indices.
With the uncertainty surrounding the U.S. elections now resolved, market attention has returned to fundamentals. A recent 25-bps rate cut by the U.S. Fed provided little relief, as it was already factored into market valuations.
Additionally, a projected slowdown in GDP growth has further weighed on sentiment. Meanwhile, attractive valuations in other Asian markets and ongoing stimulus measures in China are also influencing the relative underperformance of the Indian market.
Despite the recent correction, Indian stock valuations remain high, with the Nifty trading at a CY25 P/E of 19.8X (1.1X PEG), compared to Hang Seng’s 9.3X CY25 P/E (0.8X PEG) and Shanghai Composite’s 12.5X CY25 P/E (0.5X PEG).How do you see the outcome of the US Presidential Elections and its potential impact on Indian markets as well as sectors in particular?
We believe that a Trump victory could favor Indian sectors such as textiles, auto ancillaries, electronics, energy, defense, and metals, while potentially challenging the Indian IT sector due to tighter H1B visa regulations, with a relatively neutral outlook for pharmaceuticals.
IT: The sector may face headwinds from Trump’s anti-immigration policies, likely driving up employee costs due to stricter visa norms.
Pharmaceuticals: As India remains the largest exporter of generic medicines to the U.S. and has not encountered significant opposition, we expect only minimal regulatory adjustments, with no substantial impact on pharma companies.
Auto Ancillaries: Trump’s focus on infrastructure could drive demand for Class 8 trucks, benefiting exporters of forging equipment like Bharat Forge, RK Forge, and MM Forge.
Energy: A projected rise in the US oil & gas production and exports may increase demand for Indian metal pipes, particularly seamless and HSAW pipes.
Electronics, Consumer Goods, and Textiles: Higher import tariffs on Chinese goods could open up greater export opportunities for Indian manufacturers and exporters in these sectors.
Defense: Trump’s strategic emphasis on the Indo-Pacific region could enhance India’s role as a counterbalance to China, facilitating technology transfer and joint defense development—an advantage for Indian defense companies.
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?
A Trump victory could spur increased U.S. domestic spending, potentially driving up inflation and strengthening the dollar.
Although the market is expecting further rate cuts, the outlook for a stronger dollar and elevated inflation is diminishing the likelihood of significant rate cuts in FY25 and FY26.
Earnings season has not been that robust compared to the kind of valuations we are trading at. Do you see some more sector specific consolidation before a constructive trend can emerge?
As noted earlier, overall market valuations remain elevated, with companies offering modest to moderate guidance for FY25, impacted by the high base of FY24 and subdued consumer sentiment, particularly in urban areas. Consolidation is anticipated in the IT sector and among Auto OEMs, including 2W, PV, and M&HCV.
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?
We expect this trend to continue until mid-January 2025, with a potential revival only after the new Union Budget and Q3 FY25 results, driven by high valuations in Indian markets and an uncertain geopolitical landscape.
Which sectors are looking attractively priced at current levels?
We have a bullish outlook on the consumer sector, supported by rising consumption trends within India and expanding export opportunities.
Segments such as consumer electronics, textiles, and food & beverages are expected to experience substantial growth in the coming years.
The Nifty Consumption Index, trading at a CY25 P/E of 36.4X (with a PEG of 0.9X), appears attractive compared to the Nifty 50 index, as it offers stronger growth prospects, reflected in its lower PEG ratio.
What is your take on yellow metal and Silver which is also making headlines?
Gold, when combined with equities, enhances portfolio stability and helps reduce risk during volatile market periods. Given the current market conditions, investors might consider increasing their gold holdings.
Additionally, the recent reduction in import duty from 15% to 6% in the last Union Budget has made gold more affordable for Indian investors.
Silver, too, is expected to rise in value, driven by its extensive industrial applications, particularly in solar modules and batteries. We recommend incorporating both gold and silver into portfolios for added resilience and growth potential.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)