In an interview with ETMarkets, Nyati said: “I’m strongly optimistic about Samvat 2080, and if the ruling party secures the election, I believe Nifty could easily surpass the 25,000 mark.” Edited excerpts:
Q) We are seeing some turnaround in Indian markets – is it the Diwali dhamaka or Santa rally?
A) We’re in a strong bull market. After a decent dip to the 200-day moving average, we’re back on the upswing. While headline indices went up by around 3%, the real action is in the broader market.
The Nifty Smallcap index hit an all-time high during Muhurat trading, and many individual stocks are giving investors a reason to celebrate Diwali.
I believe this is just the start of something big. The next decade and the next 25 years are expected to be great for India, and we’re likely to see a big Diwali in the stock market.
There might be some ups and downs until December 3, especially with the state election results coming in, but after that, I expect a pre-election rally in the market.
Q) What are your expectations from Samvat 2080?
A) I’m strongly optimistic about Samvat 2080, and if the ruling party secures the election, I believe Nifty could easily surpass the 25,000 mark.
While midcap and smallcap stocks have shown impressive performance, this year may see large-cap stocks catching up in momentum.
The potential return of Foreign Institutional investors (FIIs) to the Indian market is a key factor, given the attractiveness of the Indian market amid global uncertainties.
The domestic liquidity is expected to keep growing, and we might see SIP figures crossing the 25,000 mark. It’ll be intriguing to observe when both FIIs and Domestic Institutional Investors (DIIs) align their buying strategies.
Q) Top risks that investors should watch out for in the next 12 months?
A) One of the major concerns for the Indian market lies in the potential outcome of the general election.
If the BJP were to lose, there’s a real risk of a 25% correction in both the Nifty and Sensex. Currently, the market seems to be overlooking this possibility.
Another risk factor stems from a potential slowdown in the US economy, driven by higher interest rates. However, there is a belief that these interest rates may soon revert to a more favorable direction.
The ongoing slowdown in the Chinese economy adds another layer of uncertainty. Additionally, geopolitical uncertainties may persist, contributing to an overall sense of unpredictability.
Q) How should one play the capex theme? Do you have some traction in this space ahead of national elections?
A) The capital goods sector has witnessed a significant bull run since 2021, and it appears there’s ample room for further growth. Historically, we tend to experience a slowdown in new orders and execution in the lead-up to elections.
However, if the BJP secures victory, a noteworthy influx of Foreign Direct Investment (FDI) into India is anticipated.
This surge can be attributed to the perceived assurance of policy continuity, subsequently triggering substantial capital expenditure and increased spending on infrastructure.
The potential post-election scenario could be particularly beneficial for capital goods stocks, as they may witness a substantial rally. The combination of increased FDI, policy stability, and a renewed focus on capital expenditures can pave the way for sustained growth in the capital goods sector.
Investors could find significant opportunities in this space as India gears up for heightened economic activity and infrastructural development.
Q) With interest rate at around 5% — how is FII activity likely in Samvat 2080?
A) The predominant factor driving Foreign Institutional Investors (FIIs) outflow has been the elevated global interest rates.
However, there’s an optimistic view that these interest rates have reached their peak and are poised for a reversal in 2024. This anticipated shift could serve as a catalyst for FIIs to re-enter the Indian equity market.
Remarkably, FIIs’ percentage holding in Indian equity has reached a multiyear low. Despite this, the overall outlook for the Indian market is highly promising.
This presents a compelling case for the return of FIIs to the Indian market, with expectations of a sustained increase in flow, particularly following the outcome of the elections.
Q) What does the management commentary of India Inc. suggest for the next few quarters? Any earnings of companies that stood out?
A) India Inc.’s management commentary for the upcoming quarters remains largely optimistic, even amid global slowdown concerns.
Many companies express confidence in sustained demand growth, particularly in sectors like banking, financials, and consumer staples. However, caution is advised for certain sectors like IT and consumer durables, which might face slower growth due to global headwinds.
Sectors closely tied to the domestic economy are signaling a promising outlook, while companies with significant global exposure raise some concerns.
In terms of earnings, the power sector, especially those engaged in renewable energy, stands out with clear outperformance.
Q) Real estate stocks have been in focus lately – are you tracking this trend?
A) Real estate stocks have shown remarkable resilience in the past year, even in the face of a significant uptick in interest rates.
Surprisingly strong demand, particularly for substantial projects, has been a driving force behind this positive performance.
The ongoing momentum is poised to persist, especially if there is a reversal in interest rates, potentially propelling growth in the affordable housing segment.
Looking ahead, the real estate sector is anticipated to sustain its growth trajectory in the coming year, buoyed by robust demand across all market segments.
Our bullish outlook on the Indian economy further solidifies our optimism for the real estate sector, considering it as a reliable proxy for overall economic growth.
Q) Any sectors that investors should avoid or go underweight after a recent rally?
A) Reiterating the concern about a potential global economic slowdown, it’s essential to acknowledge that sectors closely tied to the global economy, particularly IT and metal, may experience heightened volatility and could face challenges in terms of performance.
The inherent exposure of these sectors to international dynamics underscores the need for a cautious approach, considering the uncertain global economic landscape.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)