In an interview with Moneycontrol, Naysar Shah, Fund Manager for Credent AIM Multi-Cap Strategy, expressed that investors are feeling uneasy and exercising caution in response to the Federal Reserve’s hawkish stance. The Federal Reserve’s indication of a more restrictive monetary policy has raised concerns about how rising interest rates would impact different asset classes and the overall economy. This has led to a possibility of market consolidation in the near term.
Naysar Shah, with 19 years of experience in equity research and fund management, anticipates a comprehensive market resurgence throughout FY24 after Nifty50’s impressive 32 percent earnings growth in Q1FY24, driven by the BFSI (banking, financial services, and insurance) and Auto sectors. He expects the Nifty50’s annual earnings growth to hover around 15-16 percent for the year.
While India’s increasing current account deficit (CAD) due to rising crude oil prices is negative in the short term, Shah believes that it is not a major worry for the equity markets in the medium term. He highlights that India’s macroeconomics have significantly improved over the last decade, making it a solid and structural story from an equity market standpoint.
Regarding the possibility of market consolidation before the start of the September quarter earnings season, Shah believes it is quite conceivable. A consolidation phase allows investors to rebalance their portfolios and make necessary adjustments while waiting for corporate financial results, which often influence future market trends. However, forecasting short-term market dynamics remains challenging, and Shah emphasizes the importance of making informed investment decisions during any market evolution phase.
Discussing the industrial space, Shah acknowledges the sector’s good performance due to increased government expenditures and a rebound in private sector capital expenditure. However, he advises investors to proceed cautiously and use a stock-specific strategy as not all businesses in the industrial sector may continue to perform well. Prudent and selective investment techniques are crucial to navigating the current environment and finding opportunities within the prevalent optimism.
While Credent AIM Multi-Cap Strategy has yet to establish positions in the electronic manufacturing services (EMS) sector, Shah mentions that they are diligently assessing this sector. The underlying growth drivers make EMS an enticing structural growth prospect. However, due to the relative newness of many companies in this domain, thorough research and monitoring of their performance are necessary to make well-founded investment choices.
In terms of the Federal Reserve’s policy outcome, Shah states that the central bank’s decision to pause its interest rate hiking cycle signals a temporary relief, but the indication of another rate hike shows that interest rates in the United States will likely remain high for a considerable time. This has made investors apprehensive and cautious, as a potentially tighter monetary policy could have negative implications for different asset classes and the state of the economy.
Regarding the rural economy, Shah believes that it may have bottomed out after a prolonged slump. Projected government infrastructure spending is expected to revitalize the rural economy, boosting consumption, connectivity, and job creation. This could lead to a much-needed revival of rural markets and kickstart an economic rebound in these long-affected areas.
While Nifty50 achieved impressive earnings growth in Q1FY24, Shah believes it is too early to comment on the September quarter earnings disappointment for specific sectors. However, he expects a broad-based market recovery in FY24 with a yearly earnings growth estimate of 15-16 percent for the Nifty50.
Sources:
– Interview with Naysar Shah, Fund Manager for Credent AIM Multi-Cap Strategy on Moneycontrol.com