INSUBCONTINENT EXCLUSIVE:
Vinit Sambre, head-equities, DSP Mutual Fund4 min read Last Updated : Oct 14 2024 | 12:29 PM IST
As India Inc prepares to unveil its
financial performance for the September 2024 (Q2-FY25) quarter, market movement going ahead will likely depend primarily on earnings growth,
said Vinit Sambre, head-equities, DSP Mutual Fund, in an email interaction with Shivam Tyagi
Edited excerpts:What's your understanding of the market currently with brewing tensions in West Asia?Click here to connect with us on
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The recent market pullback following an extended bull-run should not be mistaken for a bear market
It is a minor correction after a significant rise in valuations
Several factors have contributed to this pullback, including escalating tensions in West Asia and a slowdown in earnings growth momentum
compared to previous periods
Additionally, optimism around a potential Chinese market recovery, driven by expectations of stimulus after a prolonged downturn, has played
economy as the country is a large importer of crude
Rising oil prices can drive up inflation and worsen the trade balance
If tensions escalate further, it could lead to an uncontrollable increase in oil prices, hence market sentiment may remain subdued for some
Anyways, with strong domestic liquidity from both institutional and retail investors, dips are likely to attract buying at more reasonable
opportunities.
Outside of banks and insurance, few sectors are trading at reasonable valuations
However, we see potential in consumer discretionary, as the sector has experienced a slowdown in business momentum but could recover due to
favourable monsoons and rising income levels among middle- and lower-income groups
Additionally, the healthcare sector is growing at a solid pace, and we are optimistic about its long-term growth prospects.What kind of
correction can we expect - time or price-wise dip?
There are two key points to consider right now: valuations and earnings growth
Indian markets have experienced substantial gains over the past few years, resulting in elevated valuations across various metrics
Some of these gains were well-deserved, driven by strong earnings growth across a broad range of sectors
However, after this period of rapid expansion, earnings growth now appears to be moderating.
With limited room for further valuation
expansion, future market gains will likely depend primarily on earnings growth
Given the anticipated slowdown in earnings momentum, we expect the markets to undergo a phase of consolidation, or time correction
story, which remains strong and intact.Apart from West Asia, what global triggers can trigger a bullish or a bearish move for the Indian
market in near to mid-term?
We need to closely monitor the US Federal Reserve's stance on interest rates, as it significantly influences
Although global inflation has remained relatively stable, caution is warranted due to the implementation of trade barriers by many
countries, which could lead to inflationary pressures in the future
Furthermore, commodity prices have become increasingly volatile because of these trade restrictions and ongoing geopolitical
uncertainties.Looking at the recent Reserve Bank of India's (RBI's ) policy decision on interest rates, what is your reading of the rate
cut situation taking in account the health of the economy?
CPI is well below the hard 4 per cent target
Core- CPI has been sustainably coming down
it remains below its potential.
Traditionally, the risk of high growth translating into inflation intensifies when an economy operates at
But, with India's potential growth on the rise and current real interest rates relatively high, there might be a larger cushion to absorb
rapid growth before inflationary pressures emerge.
Therefore, the current conditions are conducive enough for a rate-cut cycle and have
been so for quite a few months now
Furthermore, with the reconstituted Monetary Policy Committee (MPC), there is even more possibility for a fresh perspective to the monetary
policy stance.First Published: Oct 14 2024 | 12:22 PMIST
