In an interview with ETMarkets, Goel stated: “Whereas the worst could also be behind us for some shares, persistence might be essential in navigating the following part of this cycle. Traders ought to stability threat and reward rigorously somewhat than chase short-term bounces,” Edited excerpts:
What a risky February we’ve seen amid commerce struggle fears and the promoting by FIIs in Indian markets. What are your views?
Sure, February has been fairly risky, primarily resulting from international uncertainties, commerce struggle fears, and steady FII promoting. However what’s completely different this time is the robust assist from home buyers—each retail and institutional—which has helped stability issues out.Despite the fact that FIIs have pulled out a document quantity in Rs 2.1 trillion since October 2024, DIIs have stepped in with even larger investments (Rs 3.2 trillion), conserving the market from falling sharply.Again in March 2020, when FIIs offered closely, the market crashed 23%. This time, regardless of large outflows, the Nifty has held up significantly better, dropping solely 6% in
October and 4% in January.The excellent news is that FII gross sales have slowed down a bit in February. Whereas volatility is a part of the sport, India’s robust financial basis offers confidence that issues will stabilize, and ultimately, FIIs will return. Commerce struggle fears are actual – what’s the type of impression you foresee on particular sectors in addition to markets normally?
Proper now, it appears extra like a negotiation technique than a full-blown commerce struggle. The U.S. performs a serious function in international commerce, contributing 16.6% with imports and exports value $5.14 trillion. Nonetheless, it has a commerce deficit of little beneath $1 trillion, which the Trump administration is making an attempt to scale back by negotiating higher commerce phrases.
Many commerce companions, together with Canada, Mexico, the EU, and South Korea, have already agreed to decrease tariffs on key items. India, which has a commerce surplus of $35 bn with the U.S. (imports of $42bn and exports of $77.5bn), has additionally adjusted tariffs.
Because the U.S. accounts for 16% of world imports, principally merchandise, an entire commerce shutdown is unlikely. Even throughout Trump’s earlier time period, the commerce deficit saved rising from $515bn in 2017 to $653bn in 2020 and has reached $918 bn in 2024.
What about earnings? Do you see an earnings restoration in CY25?
Earnings restoration in CY25 appears very probably. The slowdown in earnings over the previous two quarters was resulting from a excessive base of 35-40% development in Q1 and Q2FY24.
Nonetheless, the development has already reversed. Each GDP and earnings are again on observe, with Nifty 50 earnings rising 5% YoY in Q3FY25 and GDP development bettering to six.8% from 5.4% in Q2.
This uptrend is anticipated to proceed, pushed by the federal government’s give attention to boosting consumption within the newest price range and potential fee cuts by the RBI, which can additional assist demand and company profitability.
Trying forward, company earnings are projected to develop at 15% YoY over the following two years, and with the 1-year ahead PE ratio now at 18-19x, which is properly inside historic averages, valuations look fairly cheap.
We consider that any market correction now solely makes India an much more enticing funding alternative.
Small & midcaps are in a bear market or in all probability buying and selling round that. How ought to one play this theme? Do you see extra ache?
Small and midcap shares have skilled vital stress, resulting in a valuation reset. The BSE Midcap index, now buying and selling at a P/E of 26 (beneath its 5-year median of 30.6), displays a significant correction, whereas the BSE SmallCap index stays barely above its historic common (22.3 vs. 21.3), indicating that small caps nonetheless carry some premium.
Whereas small and midcaps are witnessing a valuation reset, selective alternatives are rising in high quality names. Nonetheless, given the market’s tendency to overshoot on each the upside and draw back, buyers ought to brace for continued volatility earlier than a sustained restoration takes form.
The place are the pockets of alternatives for buyers this 12 months?
Because the economic system grows and earnings development picks up, a number of sectors look promising for funding this 12 months. Banks provide a structural alternative, whereas IT and export-driven firms may benefit from a weaker rupee, making their companies extra aggressive.
With rising rural incomes, extra individuals could go for two-wheelers, and decrease rates of interest might make actual property investments extra enticing. Journey and hospitality are additionally set to bounce again as tourism picks up.
On the similar time, authorities assist is dashing up the shift towards inexperienced vitality and electrical autos. E-commerce, too, is on a gradual rise, because of extra individuals embracing digital platforms for buying and companies.
There are numerous shares that commerce at a reduction of 20-50% from their respective highs. How ought to one decide these shares – what needs to be the perfect standards?
The extent of the decline throughout the BSE universe underscores the correction’s severity:
• 63.8% of shares are down 25-50% from their highs.
• 18.6% have fallen 50-80%, suggesting deep corrections in sure pockets.
• Solely 2.9% of shares have fallen lower than 10%, displaying resilience in a choose few.
Supply: Information as on twentieth Feb 2025
Whereas valuations have moderated, we nonetheless advocate a cautious, selective strategy whereas investing.
• Concentrate on high quality: search for firms with robust stability sheets, earnings visibility, and trade tailwinds.
• Keep away from speculative bets: keep away from shares that rallied purely on momentum with out basic backing.
• Use staggered entry: As an alternative of dashing in, accumulate in phases to navigate potential volatility.
• Sectoral themes: spend money on defensive sectors (FMCG, pharma) or area of interest development tales that may maintain volatility.
Whereas the worst could also be behind us for some shares, persistence might be essential in navigating the following part of this cycle. Traders ought to stability threat and reward rigorously somewhat than chase short-term bounces.
(Disclaimer: Suggestions, strategies, views, and opinions given by consultants are their very own. These don’t signify the views of the Financial Occasions)
