In an interview with ETMarkets, Sidana said: “Initiatives to boost the rural economy, MSME sector and job creation should also be in focus,” Edited excerpts:
We are trading near fresh record highs in June. What is fueling optimism?
The selloff on the result day was driven by rumours that the NDA might not be able to form the government due to coalition parties potentially switching to the INDI Alliance.
However, once there was clarity that the coalition parties of NDA would join hands with the BJP to form the government, the markets saw a sharp rally, recouping losses and hitting fresh record highs.The positive trends in global markets, favourable domestic economic data, and optimism regarding corporate earnings growth have further bolstered market sentiment.
What is your take on the Fed decision and possible rate trajectory?
The Federal Reserve’s recent decision to maintain steady interest rates indicates a cautious stance amid mixed economic indicators.Although inflation appears to be cooling off, the strong labour market and resilient consumer spending indicate underlying economic strength.Future rate decisions will likely depend on upcoming data; if inflation continues to stay below target, a rate cut may occur in the fourth quarter this year or early next year.
The Fed remains dedicated to balancing growth with price stability, highlighting the importance of data dependency in its policy adjustments.
The next big event that markets will track is the Final Budget 2024. What are your expectations from the big event?
As always, expectations are high across all segments, from industries to the common man.
We anticipate that the Final Budget 2024 will incorporate fiscal measures to boost economic growth, increase infrastructure spending, and incentives to promote domestic manufacturing in strategic sectors.
Sector wise, we expect Defence, Railways, Infrastructure and PSU sectors would benefit due to policy continuation and expansion from the government.
We also foresee reforms to attract foreign investment, simplification of the tax regime, and prioritization of sustainability and green energy.
Additionally, initiatives to boost the rural economy, MSME sector and job creation should also be in focus.
How are FIIs looking at India in the Modi 3.0 era?
At the onset of Modi 3.0, we have seen strong cash and futures based buying in the index and stocks. Before the elections, FII long index exposure was around 15%, and now it is around 55%.
This clearly indicates that Foreign Institutional Investors (FIIs) hold a positive outlook on India, driven by expectations of ongoing economic reforms, political stability, and pro-business policies.
They foresee improvements in infrastructure, further economic liberalization, and incentives for foreign investments.
FIIs are particularly optimistic about sectors such as manufacturing and renewable energy, recognizing their strong growth potential.
Additionally, India’s demographic dividend and consumption potential make it an appealing market and strengthens investor confidence.
How should one play small & midcaps in Modi 3.0? There are mixed voices, some say that large caps are likely to do better while some are looking at moderate returns from broader markets. What are your views?
Well, large-cap stocks may offer stability and are expected to perform well due to robust economic policies; small and mid-cap stocks have higher growth potential, benefiting from targeted reforms and government support.
Yet, investors should refrain from aggressive approach on the mid and small cap space in the short term.
A balanced approach is advisable. Investors should prioritize fundamentally strong companies with strong management, low debt, and strong growth prospects.
Diversifying across sectors can help mitigate risks. Staying informed about market trends, policy changes, and global economic conditions will be crucial for making well-informed investment decisions in the broader market.
Which sectors are on your buy list and sectors could see some profit-taking after the recent rally?
We are bullish on the Defence, Railways, Infrastructure, and Banking sectors. However, investors should be cautious with the IT and Real Estate sectors, as these might see some underperformance.
Auto sector is also likely to do well, propelled by growing incomes, accelerating urbanization, and infrastructural growth.
Investors may consider booking profits in companies where valuations appear stretched and future growth prospects seem limited.
We are almost through with the first half of 2024 – how do you see H22024 for India Inc. in terms of earnings?
The second half of 2024 looks promising for India Inc., driven by ongoing economic recovery, strong domestic demand and consumption, and favourable government policies that are expected to fuel growth.
Corporate earnings should benefit from improved margins due to moderating inflation and stabilized supply chains.
Additionally, an anticipated above-normal monsoon is expected to ease inflation and boost rural growth, further supporting earnings. However, global economic uncertainties and higher interest rates could present challenges.
Overall, a cautiously optimistic outlook is warranted, with selective stock picking based on fundamentals and growth prospects.
What is the biggest risk this bull market faces?
The biggest risk this bull market faces is geopolitical tension and political instability, both domestically and globally.
Globally, geopolitical tensions such as conflicts or trade disputes, can disrupt global supply chains and can create market volatility.
High inflation led prolonged high interest rates can also impact investor confidence. Domestically, political instability can lead to policy uncertainty, affecting business sentiment and investment decisions.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)