“Gold has experienced a significant rally this year, with prices increasing by over 20-25%. This surge has been driven by factors such as global economic uncertainties, geopolitical tensions, and central banks’ continued demand for gold,” says Tarun Birani Founder and CEO TBNG Capital Advisors.
In an interview with ETMarkets, Birani said: “Silver holds a unique position due to its dual role as a precious and industrial metal. Its demand is bolstered by applications in solar energy, electronics, and battery production” Edited excerpts:
Thanks for taking the time out. After a turbulent October we are witnessing a volatile November. What is your take on markets?
The Indian stock market has encountered substantial volatility in recent months, driven by a mix of global and domestic influences.
October 2024 saw foreign investors pull out over $10 billion from Indian equities, marking the highest outflow since the onset of the COVID-19 pandemic.
This trend highlights growing apprehensions about a potential end to India’s extended bull market amid signs of economic slowdown.
Despite these headwinds, India’s macroeconomic framework remains solid. The country’s GDP is expected to maintain robust growth in 2024, underpinned by strong domestic demand and reliable growth catalysts.
Nevertheless, the recent earnings season has delivered a mixed bag of results, with many companies posting lackluster earnings that fail to align with prevailing market valuations.
This divergence has led to heightened market volatility and consolidation, particularly within sectors where performance has fallen short of expectations.
In conclusion, while the Indian markets may experience near-term turbulence due to global economic uncertainty and uneven corporate results, their strong macroeconomic base and strategic positioning in global value chains offer a stable footing to navigate these issues.
How do you see the outcome of the US Presidential Elections and its potential impact on Indian markets as well as sectors in particular?
The re-election of Donald Trump as U.S. President carries multifaceted implications for India’s economy and markets.
A potential deceleration in U.S. Federal Reserve rate cuts under his administration could reduce foreign portfolio inflows into India, challenging the Reserve Bank of India in balancing inflation and growth.
Trump’s protectionist trade policies and stricter immigration measures may adversely affect Indian exporters, particularly in the IT and pharmaceutical sectors, by increasing operational costs and limiting access to skilled labor.
Conversely, his firm stance on China could accelerate the diversification of global supply chains, presenting India with opportunities to attract investments in manufacturing and technology.
Additionally, Trump’s geopolitical strategies, including alliances with nations like Israel and Taiwan, could influence global stability, impacting investor sentiment and market volatility.
While these factors introduce both opportunities and challenges, India’s robust domestic economy and strategic initiatives position it to navigate the evolving global landscape effectively.
How should investors take the outcome of the US Fed meeting? What is the kind of rate trajectory you see for the rests of FY2024-25?
The Federal Open Market Committee (FOMC) has lowered the federal funds rate by 0.25 percentage points, bringing the target range to 4.50%–4.75%. This follows a 0.50 percentage point reduction in September, indicating the Federal Reserve’s response to decreasing inflation and a moderating labor market.
The FOMC noted that while labor market conditions have generally eased and the unemployment rate has risen slightly, it remains low. This suggests a cautious optimism about the economy’s direction, with the Fed ready to adjust policies as necessary to ensure stability.
Future policy decisions will likely be influenced by upcoming economic data, especially concerning inflation and employment trends, as market participants closely watch for potential further rate changes in future meetings.
What are the queries that you are getting from your clients?
Clients are seeking guidance on current market conditions, particularly regarding the timing of additional investments and future market trajectories.
These inquiries highlight a need to comprehend the associated risks and potential returns in the current economic climate.
While such concerns are valid, it’s essential to stress that, despite market volatility, steadfast commitment to financial objectives, maintaining a thoughtfully diversified asset allocation, and aligning with one’s risk tolerance are crucial for long-term investment success.
A disciplined strategy, rooted in these principles, typically leads to more favorable outcomes than attempting to time the market.
Earnings seasons has not been that robust compared to the kind of valuations we are trading at. Do you see some more stock specific consolidation before a constructive trend can emerge?
India’s latest earnings season has painted a varied picture, with a number of companies reporting weaker-than-expected results that do not seem to support the high market valuations currently observed.
This mismatch has fueled market volatility and has triggered a phase of sector-specific consolidation, particularly in areas where earnings have lagged expectations.
Several firms reported modest gains in their earnings, while others experienced declines. While sectors such as Information Technology and Pharmaceuticals have displayed strength, industries like Consumer Goods and Manufacturing have faced headwinds due to higher input costs and weaker consumer demand.
Despite these modest earnings, valuations remain elevated, raising concerns about potential market overvaluation, with the Nifty 50 price-to-earnings (P/E) ratio staying above historical norms.
In this context, further stock-specific consolidation cannot be ruled out as the market seeks to better align valuations with actual earnings results.
Investors may become more selective, emphasizing companies with strong fundamentals and consistent earnings trajectories.
FII selloff was more than Rs 1 lakh cr in October. A part of it moved to other EMs, data showed. How is India placed among global peers? Do you see this as a trend going forward?
In October 2024, Foreign Institutional Investors (FIIs) pulled more than ₹1 lakh crore from Indian stocks, representing a record monthly outflow.
A portion of this capital was redirected to other emerging markets (EMs), signaling a change in investor sentiment.
While India has seen notable FII outflows, many other EMs have faced similar headwinds, with most Asian bonds experiencing foreign outflows in October due to uncertainties surrounding the U.S. elections.
On the other hand, markets like South Korea and Indonesia continued to attract foreign investments, suggesting that FIIs are adopting a more selective approach.
The recent wave of FII withdrawals stems from a mix of global economic concerns, valuation issues, and sector-specific dynamics.
Although it is too early to conclude if this will become a long-term trend, continued outflows could persist if these factors remain unresolved. Conversely, if corporate earnings improve, policy measures become favorable, and the global economic environment stabilizes, India could see a renewed inflow of foreign capital.
The outlook for FII investments will largely depend on vigilant monitoring of global developments and effective policy responses.
Which sectors are looking attractively priced at current levels?
In the current Indian market landscape, several sectors present attractive investment opportunities. The Private Banking sector, despite recent challenges, offers potential value as economic recovery may bolster credit growth.
The Information Technology (IT) sector continues to demonstrate resilience, with sustained demand for digital services supporting reasonable valuations.
Similarly, the Pharmaceuticals industry remains a focal point, with many companies trading at valuations that may not fully reflect their growth potential. Additionally, the Infrastructure and Capital Goods sector stands to benefit from government initiatives, presenting opportunities as projects advance.
While some Consumer Goods companies face demand-related challenges, those with strong brand equity and distribution networks are trading at attractive valuations, offering potential for long-term investors.
It’s important to note that while these sectors present potential opportunities, individual company performance can vary. Investors should conduct thorough research and consider their risk tolerance before making investment decisions.
What is your take on yellow metal and Silver which is also making headlines?
Gold has experienced a significant rally this year, with prices increasing by over 20-25%. This surge has been driven by factors such as global economic uncertainties, geopolitical tensions, and central banks’ continued demand for gold.
While the current elevated prices may suggest limited short-term upside, gold’s role as a hedge against inflation and market volatility remains pertinent.
Silver holds a unique position due to its dual role as a precious and industrial metal. Its demand is bolstered by applications in solar energy, electronics, and battery production. Notably, industrial demand for silver is projected to reach a record high in 2024.
This industrial demand, coupled with its investment appeal, suggests a favorable long-term outlook for silver.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
