“Investors should avoid high-beta stocks, which are more volatile and risky. Instead, focus on fundamentally strong companies that show strong growth potential,” he says. Edited excerpts from the chat:
The next 2-3 weeks are going to be action-packed for investors between the ongoing Q3 earnings season, Trump’s inauguration, the Fed meeting and the Union Budget back home. What will your strategy be when volatility is likely to be higher than normal?
In the current high-volatility market, adopting a conservative investment strategy is crucial. Investors should avoid high beta stocks, which are more volatile and risky. Instead, focus on fundamentally strong companies that show strong growth potential. Look for businesses with solid financials, a competitive edge and a history of consistent performance. Prioritizing stability over speculation can help reduce risks and provide a safer investment environment.
Do you think the earnings downgrade will annoy investors once again in Q3 results season? What are your broad sector expectations from Q3 earnings?
Overall, Q3 earnings expectations are generally weak, with some notable exceptions in certain sectors. In particular, the pharmaceutical (pharma) and infrastructure (infra) sectors have shown resilience relative to other industries and are expected to deliver relatively strong performance. In contrast, many other sectors are likely to face challenges, including ongoing macroeconomic pressures, inflation concerns and global supply chain disruptions, all of which could negatively impact profitability.
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While the brokerage consensus seems to be in favor of largecap stocks, a number of bluechips have underperformed in the last 2-3 years. Do you think the valuations of those bluechips are attractive enough in 2025?
While it is true that not all bluechip stocks have performed well in the last 2-3 years, there are certainly some whose valuations have become increasingly attractive for potential investment in 2025. Certain bluechip stocks, especially those that have faced short-term pressures but maintain strong fundamentals, established market positions and solid growth prospects, may offer significant upside potential as their valuations become more attractive.
Given the low street expectations from the Q3 earnings season, do you think Nifty’s current valuation is reasonable enough to limit major losses unless it is triggered by a shocking external event?
Despite low street expectations for the Q3 earnings season, which suggests that too much negative news may already be priced into the market, the Nifty’s valuation seems to have reached a level where the risk of significant losses has somewhat receded. The market has already factored in several challenges facing corporate earnings, including macroeconomic concerns and sector-specific pressures. As a result, while there may be some volatility or downward movement in the short term, large-scale declines seem unlikely unless triggered by an unexpected external shock – such as a geopolitical event, major economic crisis or global financial market disruption. .
What impact could Donald Trump’s presidency have on Indian equity markets? IT is seen as a winner but there is a threat around visa strictures. Which Indian exporters are likely to be negatively affected by the Trump regime?
Donald Trump’s presidency could have a mixed impact on Indian equity markets, with some sectors potentially benefiting while others may face challenges. On the one hand, Trump’s administration has strongly supported bringing manufacturing jobs back to the United States, particularly in sectors such as automobiles, technology and pharmaceuticals. The pharmaceutical sector, in particular, may face challenges under a Trump administration. With the Trump administration pushing to bring jobs back to the US and adopt more protectionist trade policies, Indian pharmaceutical exporters could face tougher regulations, tariffs or increased competition from US-based manufacturers.
What are your expectations from the Union Budget from a capital markets perspective?
From the perspective of capital markets, the Union Budget is expected to introduce measures that encourage long-term wealth creation. This could include expanded tax incentives for investment in mutual funds and equity-linked instruments, stimulating retail participation in the market. A simplified tax framework is expected to reduce complexities for investors, fostering greater trust and engagement. Additionally, the government could revise the long-term capital gains (LTCG) tax structure, potentially reducing rates or offering exemptions to encourage continued investments. These measures, along with incentives for retirement savings and other wealth-building products, will encourage broader investment in Indian capital markets and spur economic growth.
After the Lok Sabha election results were announced in June last year, the investment theme slowed down. Do rail, defense and other capex stocks have any play in the run-up to the budget or do you think there is a higher chance of a disappointment?
The outlook for capital expenditure (Capex) stocks, especially railways and defence, is cautiously optimistic ahead of the Union Budget. Following significant improvements in these sectors after the Lok Sabha elections, recovery is likely as government spending is expected to pick up.
Following the correction seen in the market after the September-end peak, which sectors have become attractive from a valuation perspective?
Following the market correction after the September-end peak, sectors such as BFSI (Banking, Financial Services and Insurance) and Infrastructure have become increasingly attractive from a valuation perspective. These sectors have seen significant price corrections, making them more reasonably priced regardless of their long-term growth potential. The BFSI sector, which plays a critical role in India’s economic growth, benefits from credit growth, financial inclusion and improving interest rate cycles. The infrastructure sector, on the other hand, continues to benefit from the government’s strong focus on infrastructure development and urbanization trends. Both sectors offer attractive opportunities for long-term investors at current valuations.
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