“FY25 is likely to see private banks doing well, PSU utilities could continue their uptick, while Pharma and IT could be the sectors to watch out for” says Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.
In an interview with ETMarkets, Kulkarni said: “The chances of gold doing well in FY25 are pretty high, considering other asset classes like bitcoin are hitting a new high,” Edited excerpts:
Indian market hit a new milestone in the week gone by. We are in the last month of the FY where do you markets going in FY25? Time to tone down expectations? Naveen Kulkarni: FY24 has been an astounding year, surpassing all expectations. The broader market rally of FY24 was unprecedented, which will take a lot of work to meet in FY25.Thus, expectations for FY25 were not really very high as the base effect combined with richer valuations meant modest return expectations. FY25 will likely be a year of moderate market returns in line with earnings growth.
The large caps offer decent value even at current levels, but the broader market will likely see tepid returns in FY25. Thus, expectations are seeing a bit of moderation, as seen by the current market activity.
What should investors watch out for in FY25 – any factors that could derail the bull run?
Naveen Kulkarni: The bull run of the equity markets is determined by the underlying balance sheet strength of businesses aided by macroeconomic factors of the economy. Both are quite strong. Political risks are significant and could derail the current bull run.
However, the chances of that are slim. Besides political risks, bull runs tend to be impacted by exuberance or credit crisis. The challenges of exuberance are very significant.
However, a credit crisis emanating from unsecured retail credit could be challenging. RBI understands these challenges and has been making the right moves to stem future crises.
Overall, the case for derailing the bull run is a little slim, but the challenges emanate from credit crises or political risks to some degree.
Which sectors are likely to hog the limelight in the next financial year?
Naveen Kulkarni: The current fiscal year saw a great rally in PSUs, real estate, capital goods, and other sectors. However, private banks did not participate in this rally.
FY25 is likely to see private banks doing well, PSU utilities could continue their uptick, while Pharma and IT could be the sectors to watch out for.
Gold hit fresh record highs along with equities – time to add more Gold or book profits? What is the right allocation for investors in their portfolio?
Naveen Kulkarni: The chances of gold doing well in FY25 are pretty high, considering other asset classes like bitcoin are hitting a new high.
Moreover, the challenges that central bankers continue to face due to persistent inflation mean that asset classes like gold could see higher allocations as investors try to find new avenues to diversify their risk profiles.
What is your take on the RBI’s action on various NBFCs on rampant lending. What is the broader message the central bank wants to send across to the investors?
Naveen Kulkarni: The RBI’s actions are relevant in the context of the sector’s long-term challenges. The risks in the NBFC sector are quite real, and RBI’s actions will safeguard the interests of retail investors in the long term.
Do you see any particular theme (sector) looking overheated?
Naveen Kulkarni: Real estate sector stocks are seemingly in an overheated zone. While real estate as an asset class could still deliver returns, the sector stocks could see some challenges ahead as they have to outperform earnings and cash flow expectations, as prices have run ahead of medium-term fundamentals.
Do you see FIIs hunting for more small & midcap stocks as they hunt for growth?
Naveen Kulkarni: FIIs could return, but they tend to focus on liquidity and valuations. Their comfort zone is some correction away. Thus, with some market correction, FIIs could return to looking for small—and mid-cap stocks.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)
