“There are pockets of exuberance emerging, so caution is advised in selecting sectors and scrips. Modest returns from equities should be anticipated in the next year.” says Ramkumar K, Chief Investment Officer, Reliance General Insurance.
In an interview with ETMarkets, Ramkumar said: “We believe that domestic flows have driven the search for mid and small-cap stocks,” 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?
Ramkumar K: The domestic market hit a new heigh, but not in isolation. Major equity markets worldwide, even those facing a looming recession, are performing remarkably well and achieving new highs.
We have been the fastest-growing economy for many years, including the current year, and our market movements are only marginally better than theirs.
However, pockets of exuberance are emerging, so caution is advised in selecting sectors and scrips. Modest returns from equities should be anticipated in the next year.
What should investors watch out for in FY25 – any factors that could derail the bull run?
Ramkumar K:Since the risk assets market rally was common across the globe, we believe that any disruption in the momentum can only result from external factors.
The factors to watch out for include the US General elections and the possibility of changes in global policies.
Additionally, the potential for US Federal interest rate cuts, signaling an emerging slowdown, aligns with projections of lower global growth and corporate earnings for the current year.
Which sectors are likely to hog the limelight in the next financial year?
Ramkumar K: We feel secure in large banks, which are currently priced relatively lower compared to their historic levels, despite having a stronger balance sheet.
The valuation gap between banks, differing in growth, margins, bad assets, and capital, has narrowed considerably. However, it is expected to widen again during challenging times.
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?Ramkumar K: The RBI is clearly indicating caution and taking punitive action against companies whose processes are suspect. This preemptive action ensures curtailing over exuberance and will force the companies to set right the lacunae, if any.
Do you see any particular theme (sector) looking overheated?
Ramkumar K: The energy sector is undergoing continuous change. We have observed the direction of these changes, and a few innovative solutions at the right cost are poised to bring about the revolution quickly.
Do you see FIIs hunting for small & midcap stocks as they hunt for growth?
Ramkumar K: The larger companies have become relatively cheaper in valuation, and their ability to maintain high margins despite increased input costs last year was commendable.
This efficiency improvement will be reflected in earnings over the next couple of years. We believe that domestic flows have driven the search for mid and smallcap stocks.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)
