On the investment bets for FY25, “we have had a bet on infrastructure and a tilt on PSU stocks, which we continue with this year. The allocation has shifted from smaller stocks to large caps,” Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS says in an interview with Moneycontrol.
In the run-up to the elections, she sees the PSU and infrastructure stocks shine. “And continuing the same policies after the elections could continue boosting these stocks,” she says.
“If the fed funds rate-cut scenario becomes clear, we will see ourselves shifting more emphatically toward IT,” says Sonam with more than 10 years of experience in quantitative research and portfolio management.
Paytm stock has crashed 45 percent since the regulatory penalty news came in, while the stock found some buyers last week, the overall trend in the stock price has been negative. A big sentiment hit against the stock as analysts speculated on the violations inside the bank that led to such a ban.
On the business front, the company could survive without the payments bank license – relying on third-party banks will impact business performance and a loss of control.
The digital vendor’s profitability path might get stretched, and the stock might only find a few buyers until it can show a clear path for growth ahead and do away with all the negative sentiment. Investors should be careful with the stock and not be tempted to buy at a bargain till they understand the future outlook.
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Do you think the government is more focussing on value appreciation and then will focus on divestment later?
The government’s focus on the value appreciation of state-run assets is evident in the government’s budgetary allocation on infrastructure spending and fiscal consolidation. The government should ensure that state-owned assets reach their full potential before selling them. This could involve improving operational efficiency, investing in growth, and addressing legacy issues.
Selling strategic assets below perceived value can trigger public criticism. Focusing on appreciation reduces such risks. The government also faces significant fiscal challenges. Divestment can generate substantial revenue to reduce debt or fund social programs. But, of course, some sectors might be deemed crucial for national security or social welfare.
The government might prefer retaining control until suitable alternatives emerge. The Indian government’s approach seems to be a balance between achieving value appreciation and pursuing divestment, depending on the specific asset and sector. While some strategic assets prioritize value appreciation, others are targeted for quicker divestment, especially where fiscal needs are pressing.
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Does it mean the government will exceed the divestment target for FY25?
Meeting the Indian government’s divestment target of Rs 50,000 crore for FY25 (2024-25) appears challenging based on historical performance and current hurdles. Despite setting a higher target than the revised FY24 target of Rs 30,000 crore, the government has consistently missed divestment targets for the past five years.
While some successful divestments have occurred this year, delays in major plans like BPCL, Shipping Corporation of India, and Container Corporation of India pose significant challenges. Market volatility, political considerations, and execution complexity further complicate the process.
Analysts suggest that achieving the ambitious FY25 target is unlikely, with a more realistic figure closer to Rs 40,000 crore. Monitoring developments and market conditions throughout the year will clarify the outcome, highlighting the need for flexibility and adaptation in the government’s approach.
Is the equity market looking expensive at current levels? What are the next key triggers for the market?
While many investors have shown concern that the equity market has become “expensive,” this is a complex question with various interpretations. The valuations for the Nifty in terms of PE (price-to-earnings) and the CAPE (cyclically-adjusted price-to-earnings) ratios are above their long-term averages but are nowhere near the historic highs.
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At these levels, the primary concerns that investors might have that could lead to values being expensive are interest rate concerns and geopolitics. There could be valuation concerns if the rate cuts stay distant and the government does not bring accommodation.
On the other hand, the corporate earnings have been supportive and are justifying the valuations. There is ample liquidity support, and equities are still the most attractive destination compared to other assets. We believe that central bank policies, corporate earnings, upcoming elections, and geopolitics will be the key governing signals from here.
Have you changed your bets for FY25?
We have had a bet on infrastructure and a tilt on PSU stocks, which we continue with this year. The allocation has shifted from smaller stocks to large caps. In the run-up to the elections, we see the PSU and infrastructure stocks shine, and continuing the same policies after the elections could continue boosting these stocks.
We see some allocation in metals, healthcare and financial services counters after the budget. Our allocation hasn’t shifted drastically but has seen some exciting additions. Maybe if the rate-cut scenario becomes clear, we will see ourselves shifting more emphatically toward IT.
Do you think the interest rate cut will get delayed further (by RBI and Fed)?
There seems to be a chance that the interest rate cuts by both the RBI and the Fed might be delayed further. The RBI prioritizes price stability over lowering rates due to high inflation, the Fed’s hawkish stance, and domestic concerns in India. Similarly, the Fed might continue raising rates or slow down the pace depending on inflation, but cuts are unlikely soon.
However, predicting exact timelines for rate cuts is tricky. The decision-makers will continue to be data-driven, but there is no chance of a rate cut in the first half of the calendar year, and the cuts could even be pushed to the last quarter of the year. It is an evolving situation with huge implications, so investors need to be vigilant.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
