Sensex@75K, Nifty@22K – should investors be worried or do you see FOMO in the market? Where do you see the market headed?
Our year-end Nifty50 target is 24,000, which means we are looking at a high single-digit return this year from the index.We witnessed a significant run-up in the markets last year, which has made the overall markets expensive as compared to their historical valuations, but we expect earnings growth for Indian companies to remain strong, which should aid the market overall.
In the near term, we could witness increased volatility on the back of geopolitical tensions in the Middle East and Ukraine – Russia apart from likely uncertainties from the Indian national elections, but from a one-year perspective, we remain constructive on the markets.
What are you suggesting to your clients now? What are the general queries that you are getting?
We always maintain that investors should have a long-term view of equity investments.
Equities as an asset class can be more volatile than fixed-income products in the short run, but over a longer period, they are more likely to generate superior returns for investors.Investors are currently concerned about the geopolitical uncertainties surrounding the global economy, apart from the valuations of the Indian markets.What could derail the bull rally in FY25? Any important factors that one should watch out for?
Risk 1: If investors sense that we might witness policy uncertainty post-elections, this bull rally can derail.
Risk 2: Another risk to this rally is increased geopolitical tensions between the West on one side and China/Russia on the other or in the Middle East, which can lead to higher energy prices and, thus, pressure on the Rupee.
Risk 3: Higher and persistent inflation in the US and Europe, which leads to investors’ assumption of a higher risk-free rate, can also lead to the de-rating of global equity markets, including India.
We are already seeing outflows from small & midcap funds – and inflows into equity funds also saw a decline. Are MF houses booking profits or staying cautious?
We believe MF houses are not booking profits or increasing cash levels. They may be re-orienting their portfolios towards more large caps where the valuations are still reasonable compared to some mid and small-cap stocks.
Also, with an increased focus on fund flow towards small and midcap schemes by the regulator, some of the MF houses have curtailed or restricted lumpsum inflows into these strategies, which could have led to a slowdown in inflows for small & midcap funds.
SIP amount stays above Rs 19,000 cr for the second month in a row. Where do you see the monthly contribution headed in FY25?
Increased SIP inflows result from a culture change among investors, which we have witnessed post-COVID when equity investing through the MF route has picked up.
We expect SIP contribution to structurally keep going up due to this culture change, though the rate of growth could moderate if we witness increased volatility in the markets.
Gold surpassed Rs 72,000 per 10 gm in April and Silver surpassed Rs 82,000 per kg – record highs. Where is the yellow metal and Silver headed?
The quick run-up we have witnessed in Gold and Silver has not followed historical correlations where typically higher real rates lead to a bullion price correction.
This time, prices have moved up despite higher real rates globally. This is likely due to the gradual erosion of trust in USD-denominated trade, possibly due to Russia’s reserves getting frozen.
Thus, key Central Banks globally have been buying Gold and increasing the proportion of Gold they hold as part of their reserve assets at the expense of USD treasuries.
We believe that this move from USD-denominated assets to bullion should continue for some time till Central Banks find alternate avenues to invest their reserves.
Thus, we are bullish on Gold and Silver for the long run. We recommend investing a small percentage of one’s financial net worth in bullion as part of diversification strategy.
What will work in FY25 – which could turn out to be a volatile year for investors amid elections, US Fed interest rates as well as crude oil prices?
FY25 could be a volatile year due to elections, US Fed interest rates, and crude oil prices. One attribute that typically works in a volatile year is discipline, which means one needs to be disciplined while deciding the asset allocation strategy.
If the investor is investing in equities, then it is recommended to have a long-term view. For equities as asset class, as mentioned earlier, we expect high single-digit returns for Nifty50 this year.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)