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Time of India
02-06-2025
- Business
- Time of India
Valuations higher than what growth warrants; pick stocks carefully in this market: Shreyash Devalkar
Shreyash Devalkar , Fund Manager, Axis Mutual Fund , recent GDP growth numbers for FY25 and Q4 met expectations. US flows are aiding the market. Despite lower volume growth, valuations are high. The IT sector's growth and PE ratio trends are an example. Globally, IT service valuations have shifted due to higher cash flows. Current valuations exceed what growth justifies. Careful stock picking is essential in this market. Indian markets have had a strong. Will this party continue and if yes, why and if no, why not? Shreyash Devalkar: You have been highlighting one point which is true as far as overall markets are concerned – good macro, in which there is low interest rate, low commodity prices, and fiscal deficit in control. The recent GDP growth numbers released for FY25 and Q4, have not shown much deviations from the expectations though the numbers are not what the market expected a year ago. But as of now, there is no deviation. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Una inversión en Amazon podría darte un salario extra. Undo So, broadly, combining all these factors we see definitely the flows from the US are there and that is definitely helping the market. And despite relatively lower growth on the volume front especially, the valuations are definitely high. I always give an example of the IT sector. In the first decade of this century, the IT sector used to grow at 15% with around 20-25 PE. In the second decade, it grew at around 10% with 15-20 PE, and now it is growing at around 5% with around 20 PE. So, the growth is low and the valuations are definitely higher than expected. Some of these valuations are not only in India and if you see IT services globally and take similar companies like Accenture in the US, there also they have seen some changes in valuation, the most appropriate reason is actually over the last three decades, the higher cash flows and higher payouts which this sector has witnessed. But broadly for various reasons, we can try to attribute one thing or other for every sector per se. Valuations are now higher than what the growth would warrant. So, one needs to be very careful in terms of stock picking in this kind of market. Is it okay to say that the macros are looking much better than the micros. Will that be a fair statement? The rupee has stopped falling. Inflation is coming under control as are bond yields. There has been an early onset of monsoon. Are we in for macro dominated rather than micro dominated trade now? Live Events You Might Also Like: Can India become the services factory of the world? Gautam Trivedi explains Shreyash Devalkar: Yes, this has been the case probably for one year to one-and-a-half years. Just one year ago, this trade had started because over last year we saw earnings cut and since September of 2024, the market started reacting to the micro numbers. If you remove even Trump trade related fall, before that also, there was a substantial fall and that was micro related. So, let us not totally ignore the micro and earnings growth. This phase has been a reminder of that and that is where on a one-year basis and so on, the returns as such are not as lucrative as one would like to have. So, definitely macro is good and it provides some downside protection to the market, but micro would be important to make money in individual stocks. We just concluded the Q4 earning season. Help us understand what were your key takeaways from the earning season? Other than that, which sectors do you believe offer an opportunity for long-term investors? Have you spotted any standout sector? Shreyash Devalkar: As far as the season is concerned, it was good versus expectations. What is happening currently is that since the last two-three quarters, the earnings are getting cut ahead of the earning season and expectations are getting revised downward prior to the earning season. So, generally, the earning season is not seeing as much cut as far as the period of approaching the earning season and that is why you have seen that not much reaction to the earning disappointment during the earning season per se. The stocks actually fell, as I said, from September onwards itself. If you take the largecaps represented by Nifty 50, then the growth has been less than 5% overall, while the broader market growth has been around 8%. Good growth in the context of valuation, has been in financial services in the last quarter in terms of NIMs versus expectation. Growth as well as asset quality have been good in some of the oil marketing companies, and the frontline capital goods companies as well. Only a part of the margin is where the focus is on the market especially when it comes to the capital goods and auto kind of cyclical sectors. Otherwise, the earnings are broadly in line with expectations. Since earnings are getting cut for the last three-four quarters ahead of the earning season, I see that FY26 earnings may not see further cuts beyond a point because the market has tried to factor in the recent trends in the earnings in FY26 as well. FY27 is where the entire bulge is when it comes to the earning growth expectation. As far as near-term earning cuts are concerned, we are broadly there. You Might Also Like: Top Nifty50 stocks analysts suggest buying in this volatile week What in this market is cheap but not good and what is good and yet cheap? Shreyash Devalkar: That part has been the case again for the last eight months or one year or so. So, the largecap of India mostly if you take bank, FMCG, IT, largest companies some of them, point is that since they are so large their growth is very much dependent on GDP growth and at 6-7% GDP growth whatever are the numbers for that and if there is expectation of the GDP growth further improving from here, with that expectation definitely the largecaps are reasonably valued compared to their growth expectation. If GDP growth accelerates, then largecaps can give better risk-adjusted returns. When it comes to mid and smallcaps, this conundrum has been there for the last three years now. It is not today's conundrum that largecap lacks growth while valuations are reasonable and midcap, smallcap the growths are better than the largecap but valuations have got elevated quarter after quarter. A 20 PE mid, small great growth story, became 30, 40 after every quarterly result season. Even in this quarter, the same thing would have happened and initially largecaps outperformed. But post the result season, many of the mid and smallcaps because of the good earning growth delivery have caught up. As an investor, if I am running a diversified portfolio, we are looking at a mix of both. So, just for the sake of reasonable valuations, one need not be entirely in the low growth segment. At the same time, one should not totally ignore some of the companies where the valuations are high, but the growth stories are intact. So, reasonable valuation is what we are looking forward to in our diversified funds. You Might Also Like: Stocks to buy today: Paytm, Swiggy among top 5 trading ideas for 2 June 2025
Economic Times
30-05-2025
- Business
- Economic Times
ETMarkets Smart Talk: Sachin Relekar on consumption & defense: Top themes for future wealth creation for long term investors
Welcome to ETMarkets Smart Talk. In this insightful session, we sit down with Sachin Relekar, Senior Equity Fund Manager at Axis Mutual Fund, who shares his expert views on the key themes driving India's equity highlights consumption and defense as pivotal sectors offering promising opportunities for long-term wealth creation. Amid global uncertainties and evolving domestic policies, he explains why these themes are well-positioned to benefit from India's structural growth story. Edited Excerpts – ADVERTISEMENT Q) The month of May started on a volatile note with benchmark indices witnessing wild swings on either side. How are you reading into markets?A) Since the beginning of 2025, several significant macroeconomic events have unfolded. The year commenced with a change in the US presidency, leading to a review of trade relationships with an "America First" objective. In April, the US announced reciprocal tariffs across countries in varying degrees, followed by major changes, including a 90-day pause in tariffs with all countries including China. There is also an expectation that in the coming days the US will sign trade deals with other countries. While these announcements are being made rapidly, the implementation is likely to be slow due to the importance and complexities May, India experienced a geopolitical situation which while brief, its impact was substantial. Both global and domestic capital markets reacted to these macroeconomic events in May, and it is expected that these events will continue to influence market movements in the near term. ADVERTISEMENT However, we believe that the extreme negativity from these events has already been priced in. Moving forward, greater clarity on trade relations is anticipated, which will provide direction to the the medium to long term, our outlook remains largely positive, given the stronger domestic economic prospects. ADVERTISEMENT Q) What is the sense you are making from the March quarter results? Are downgrades more than upgrades this time around?A) The earnings season has produced a mixed set of results. Companies with exposure to developed markets have reported lower earnings, which was within the consumer staples segment continue to experience lower volume growth, while consumer discretionary companies have reported weaker numbers. However, internet, telecom, and select capital goods companies have delivered positive results. ADVERTISEMENT Q) What is the long-term outlook for Indian equities over the next few years? A) We believe that India represents a long-term growth story. Our positive outlook is particularly focused on the consumption sector, with a strong emphasis on the consumer discretionary is a significant long-term trend that is expected to drive sustained growth in this area. ADVERTISEMENT Government policies are clearly designed to support domestic manufacturing, which is a critical component of India's economic strategy. The defense sector, as a thematic investment, may also hold a positive long-term outlook due to ongoing government initiatives and increased budget allocations. Overall, there are several promising themes to consider. Listed companies in India appear to have healthier balance sheets, which enhances their ability to capitalize on growth opportunities. These factors collectively contribute to a favorable long-term equity outlook for India. Q) Which sectors are expected to deliver strong returns going forward? Any safe bets which investors can consider? A) There are several interesting themes and sectors which we believe may benefit from the healthy domestic economic growth and government policies. Some of them can be consumption, consumer discretionary, etc. Q) How can high-net-worth individuals effectively build wealth in the current market environment? A) The investment outlook over the long term is largely positive. While investing one however needs to be disciplined about the management quality, business competitiveness and the same time one should take a longer-term view of the opportunity to meaningfully benefit. Last but not the least, it is important to be disciplined about asset allocation. It plays most important role in determining the financial outcomes. Q) What is your take on Gold? Recently, it crossed Rs 1 lakh in the physical market. Right time to increase allocation or investors should wait for some cool off? A) Gold is currently responding to the uncertainty surrounding global macroeconomic conditions. Should these conditions stabilize and improve, the support for gold may it is essential to focus on prudent asset allocation. Given the natural fluctuations of markets, strategic asset allocation is crucial for wealth building.A diversified portfolio is generally effective, provided one has the patience to maintain it over the long term.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
30-05-2025
- Business
- Time of India
ETMarkets Smart Talk: Sachin Relekar on consumption & defense: Top themes for future wealth creation for long term investors
Welcome to ETMarkets Smart Talk. In this insightful session, we sit down with Sachin Relekar , Senior Equity Fund Manager at Axis Mutual Fund , who shares his expert views on the key themes driving India's equity markets. Sachin highlights consumption and defense as pivotal sectors offering promising opportunities for long-term wealth creation. Amid global uncertainties and evolving domestic policies, he explains why these themes are well-positioned to benefit from India's structural growth story. Edited Excerpts – Q) The month of May started on a volatile note with benchmark indices witnessing wild swings on either side. How are you reading into markets? A) Since the beginning of 2025, several significant macroeconomic events have unfolded. The year commenced with a change in the US presidency, leading to a review of trade relationships with an "America First" objective. In April, the US announced reciprocal tariffs across countries in varying degrees, followed by major changes, including a 90-day pause in tariffs with all countries including China. There is also an expectation that in the coming days the US will sign trade deals with other countries. While these announcements are being made rapidly, the implementation is likely to be slow due to the importance and complexities involved. In May, India experienced a geopolitical situation which while brief, its impact was substantial. Both global and domestic capital markets reacted to these macroeconomic events in May, and it is expected that these events will continue to influence market movements in the near term. However, we believe that the extreme negativity from these events has already been priced in. Moving forward, greater clarity on trade relations is anticipated, which will provide direction to the market. Over the medium to long term, our outlook remains largely positive, given the stronger domestic economic prospects. Q) What is the sense you are making from the March quarter results? Are downgrades more than upgrades this time around? A) The earnings season has produced a mixed set of results. Companies with exposure to developed markets have reported lower earnings, which was anticipated. Companies within the consumer staples segment continue to experience lower volume growth, while consumer discretionary companies have reported weaker numbers. However, internet, telecom, and select capital goods companies have delivered positive results. Q) What is the long-term outlook for Indian equities over the next few years? A) We believe that India represents a long-term growth story. Our positive outlook is particularly focused on the consumption sector , with a strong emphasis on the consumer discretionary segment. Urbanization is a significant long-term trend that is expected to drive sustained growth in this area. Government policies are clearly designed to support domestic manufacturing, which is a critical component of India's economic strategy. The defense sector , as a thematic investment, may also hold a positive long-term outlook due to ongoing government initiatives and increased budget allocations. Overall, there are several promising themes to consider. Listed companies in India appear to have healthier balance sheets, which enhances their ability to capitalize on growth opportunities. These factors collectively contribute to a favorable long-term equity outlook for India. Q) Which sectors are expected to deliver strong returns going forward? Any safe bets which investors can consider? A) There are several interesting themes and sectors which we believe may benefit from the healthy domestic economic growth and government policies. Some of them can be consumption, consumer discretionary, etc. Q) How can high-net-worth individuals effectively build wealth in the current market environment? A) The investment outlook over the long term is largely positive. While investing one however needs to be disciplined about the management quality, business competitiveness and valuation. At the same time one should take a longer-term view of the opportunity to meaningfully benefit. Last but not the least, it is important to be disciplined about asset allocation. It plays most important role in determining the financial outcomes. Q) What is your take on Gold? Recently, it crossed Rs 1 lakh in the physical market. Right time to increase allocation or investors should wait for some cool off? A) Gold is currently responding to the uncertainty surrounding global macroeconomic conditions. Should these conditions stabilize and improve, the support for gold may diminish. Therefore, it is essential to focus on prudent asset allocation. Given the natural fluctuations of markets, strategic asset allocation is crucial for wealth building. A diversified portfolio is generally effective, provided one has the patience to maintain it over the long term.
Mint
26-05-2025
- Business
- Mint
Mutual fund holding in NSE-listed firms surpasses direct retail for the first time
Domestic mutual funds' holding in NSE-listed companies has surpassed ownership of individual investors for the first time to an all-time high, as flows into systematic investment plans remain steady amid selling in mid- and small-caps by the direct retail category. Mutual funds' share as a percentage of the total market capitalization of the companies listed on the National Stock Exchange (NSE) stood at a record high 10.4% in the quarter ended March 2025, surpassing the 9.5% share of individual investors who trade directly, according to NSE's India Ownership Tracker report. Record inflows These funds infused ₹1.9 trillion into equities in Q4 of FY25, taking total net inflows to ₹6.1 trillion for the year, the highest for any fiscal to date. Read more: Why balanced advantage funds are back in focus for moderate risk investors 'In value terms, DMF (domestic mutual fund) holdings stood at ₹42.4 trillion, down just 2.4% QoQ, despite a larger drop in the overall market cap, reflecting sustained net equity purchases," the report said, adding that the strong momentum was 'driven in part" by continued retail participation through systematic investment plans (SIPs). Individual holding in NSE-listed companies declined by 30 basis points sequentially to a seven-quarter low of 9.5% in January-March, led by reduced share in mid- and small-cap companies--a segment that saw aggressive buying by individuals over the past few years, according to the report. 'In value terms, individual holding in NSE-listed companies fell by 9.2% QoQ to ₹38.9 trillion—exceeding the overall drop in market cap—indicating subdued retail activity and elevated market volatility and uncertainty," the tracker showed. Market veterans expect the trend to continue, given that individuals trading directly tend to use the mutual fund route after encountering losses in their investments. 'We have seen market volatility between October last year and 7 April, which has singed direct retail," said B Gopkumar, managing director and chief executive officer at Axis Mutual Fund. 'This trend in holding will weigh in favour of mutual funds as some individual investors who have been hit by losses in any cycle tend to return through the MF route." Mutual fund inflows are expected to remain buoyant, said analysts. Read more: Why do your returns rarely match what funds deliver? "With the investment environment turning more favourable, mutual fund flows are likely to gain further strength," said Nirav Karkera, head of research at wealth-tech platform Fisdom. 'Positive equity outlook and a gradually emerging risk-on sentiment are expected to drive continued interest from retail investors." The total market cap of the listed universe fell to ₹408.9 trillion as of March from ₹436.6 trillion as of December.
Time of India
19-05-2025
- Business
- Time of India
Momentum mutual funds are leading mkt recovery, could give huge gains now: Should you rush to invest?
After struggling during the market downturn, the momentum strategy—chasing recent winners—is back on top. Funds tracking momentum indices are capitalising on the current market recovery. But should investors jump on the bandwagon, or is it too soon to ride this rally? From peaks to crashes In recent years, investors betting on momentum have seen the whole gamut of outcomes. The 'buy high, sell higher' mantra initially caught investors' fancy amid the near-uninterrupted market uptick post the March 2020 outbreak of Covid-19. Momentum stole the limelight in 2021 with a 75.8% return, outperforming all other investing styles and trouncing the Nifty 500 index (16.5%). After slipping up briefly in 2022 (-9.3%), momentum roared back into form in 2023 (46%) and 2024 (25.6%), emerging among the charttoppers and leaving the Nifty 500 index (25.2% and 15%) trailing in its wake. But towards the end of 2024, investors discovered that momentum is no free lunch. With the market cracking under the weight of steep valuations, tepid earnings growth and trade wars, momentum investors were in for a shock. The Nifty200 Momentum 30 index slipped 31% from 26 September 2024 to 7 April 2025. Comparatively, Nifty 500 lost 18%. Karthik Kumar, Fund Manager at Axis Mutual Fund , remarks, 'Momentum has exhibited volatility it hadn't seen for quite some time. Whenever a sudden shift in the market occurs, momentum typically takes time to reflect the newer realities, and exhibits a lag in such periods.' Many momentum portfolios were skewed towards value stocks just as the market turned, leading to sharp underperformance. Momentum strategies have gained sharply amid market recovery After underperforming over six months, momentum is regaining ground. But the tide has turned again. With the stock market rebounding smartly, the momentum trade is soaring high. Since 7 April 2025, the Nifty200 Momentum 30 index has gained 11% even as the Nifty 500 index gained 7.8%. Arihant Bardia, CIO, Valtrust, observes, 'Momentum investors have now seen a complete cycle. Many who got in previously on sharp outperformance have now also seen it lag the market.' Live Events Coming out of the storm So what does momentum have in store for investors now? Some experts reckon the time is ripe for momentum to kick into higher gear. Bardia asserts, 'Momentum typically starts outperforming when the market recovers from a sharp drawdown and breaches previous highs.' He reckons the drawdown is behind us and the market is on recovery path. The frontline BSE Sensex index is now only 4% off its previous peak of 85,978 even as the BSE Midcap and BSE Smallcap indices are still 12% and 15.8% shy of their respective highs—but gaining ground quickly. Historical evidence supports momentum strategies at such junctures. However, betting on continued upswing in momentum on this evidence alone may backfire also, warn experts. 'Momentum will do well if market trends evolve gradually. But sharp changes in trends will lead to higher churn in winning stocks, which could temper returns,' cautions Kumar. To be sure, the market fog has seemingly dissipated in recent weeks. The ceasefire between India and Pakistan, the cooldown in US-China trade animosity and the imminent Ukraine-Russia peace talks provide a solid platform for further market upside. However, other surprises may yet derail the fragile recovery. Tackling the beast Experts maintain that investors should avoid timing their pursuit of momentum. The idea behind momentum investing is not to try and catch the top or the bottom of the market or a stock, but to simply ride an established trend. Investors must simply let momentum do what it does best. Any good momentum strategy adapts to the evolving market realities, latching on to the winners and letting go of the losers. 'The transition happens with a lag, but momentum is adept at changing its form in a way that reflects the market's current preferences,' insists Kumar. While momentum can cut deep amid a market correction, it is proven to deliver superior outcomes over longer periods of time. Bardia observes, 'Momentum tends to exhibit higher volatility but the risk-adjusted return over longer periods tends to be much higher. The outcomes typically compensate for the higher risk taken.' He suggests investing in a staggered manner and staying committed to the chosen momentum strategy for threefive years to make the most of its capabilities. Kumar points out that risk in momentum strategies is equivalent to any small cap offering, and so should be pursued through the lens of asset allocation. Such factor-based funds should form part of the satellite portfolio, not the core. Further, active momentum strategies may prove better at containing downside risk. Typically, momentum is a fast moving signal that requires deft portfolio manoeuvring. Index-driven momentum funds are slow to react as these embrace longer look-back periods (for price trends) and slower portfolio rebalancing. Actively run momentum strategies, on the other hand, capture both near-term and long-term price trends and rebalance more frequently. This enables quicker transitions, reduces the signal decay and cushions the downside better.
