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“The market seems likely to complete a 10 per cent correction in the near term, but only after the budget as everything will go into a lull for a few months after the budget,” UmeshKumar Mehta, director of Samco Mutual Fund investments. to money control. So far, the market has lost 3.5 percent from an all-time high.
He feels that micro and small cap companies are already showing signs of weakness.
Among the sectors, he is optimistic about the electricity sector. “The roadmap to increase energy through RE (renewable energy), both solar, wind and green hydrogen, should emerge as a megatrend in the coming years,” says Umeshkumar, with over 24 years of experience in the field. capital market.
Do you see any risk factors after reading the business results announced so far?
The risk of extrapolation by investors that the same pace of huge earnings growth will continue is the emerging risk, as almost all sectors have done quite well in the current quarterly or half-yearly figures. However, risk is also emerging on the side of personal or unsecured loans, which have seen massive growth, and the RBI is looking into it through appropriate policy measures. But the staggering Rs 48 lakh crore in unsecured loan portfolio, which was only half four years ago, is a cause for concern.
Corporate balance sheets have strengthened, but the finances of the masses could be weaker than ever given the amount of debt they have accumulated. Maruti Suzuki is having a tough time selling cars in the mass market, but premium cars are flying off the shelves.
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What do you think of management’s comments on the outlook for Q4FY24 and FY24?
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Management’s comments are optimistic, but remember they are coming off a year of high growth; sometimes they are also tinged with a topical bias. In IT, we saw divergent views at LTIMindtree and Infosys.
QSR (quick service restaurant) companies are still hopeful that inflation will decline and purchasing power for discretionary spending will increase this year; On the other hand, the real estate sector is enthusiastic and building a stronger outlook. All in all, most expect a repeat of a decent performance in the future.
Do you still see great value in the banking sector (both PSU and private)? Have you detected any concerns for the PSU or private banks?
The banking sector was facing commodity problems last year, when stock markets were booming and property sales were at an all-time high. The raw material for banks is the cost of deposits, which is scary. This had led to rising costs for most private lenders and NFBCs, though PSUs were partially saved.
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But when the tide turns, banks will be in a better position both from a valuation perspective and from a growth perspective, which will come from a low base. PSUs are red hot now and may remain so, but from the point of view of long-term sustained wealth creation, private lenders now offer a better risk reward.
Do you think the market will complete a 10 percent odd correction in the near term, before moving on to the next leg of the upward movement towards a new high?
It seems likely, but only after the budget, as everything will go into a lull for a few months after the budget. Micro and small cap companies are already showing signs of weakness, not all stocks are participating in the rally, very few are still roaring, but every day that number is also falling, which can be said that the markets are preparing for a correction .
Is the possible delay in interest rate cuts a major concern for the market or do you see any other risk factors (including banking) affecting market sentiment?
Interest rate cuts, whether they come now or in six months, are nothing to worry about. The concern is the frothy valuations in some of the capex driven sectors, automobiles, real estate, energy etc. where too much future growth is built in and when the numbers don’t appear the markets will inevitably disappoint .
Also read: Budget and markets: Will the PSU rally continue after the budget?
Do you expect the government to announce more measures to boost rural demand and infrastructure? Is this an important event (interim budget) to keep an eye on?
There is enough on a plate for the government to build infrastructure in both rural and urban areas, but this time something in the form of freebies for the rural or lower strata that may give a negative surprise to the market. This is an election year anything is possible.
Are you optimistic about the electricity sector as a whole?
Yes, the energy sector has been fundamentally lacking in new investments in recent years, stalled energy projects etc. on the one hand, and increasing consumption due to digitalisation, smartphones and electric vehicles (EVs). This caused shortages. The roadmap to increase energy through RE (renewable energy), both solar, wind and green hydrogen, should emerge as a megatrend for the coming years.
Do you want to wait for Q4 results before getting more exposure to the IT sector or is this the right time to get in?
As the IT sector is becoming a core sector, we will have to have it in our portfolio for sustainable capitalization. With that long-term mindset, it’s best to buy when reviews are negative and when others are reducing exposure. This has happened in the last few quarters and is therefore now ripe for a decent increase, given the subdued interest rate scenarios around the world.
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