Overweight on financials, industrials; power, railways, defence look attractive for long term: Mihir Vora, TRUST MF
The medium-term outlook is positive, albeit with risks in the background, and there are quite a few potential triggers which can potentially take the market to new highs.
Macro conditions in India are firming up. GDP for Q4FY25 surprised positively at 7.4 per cent, driven by a steady expansion in private consumption on the rural side and capex momentum in government spending.
CPI inflation eased to 3.2 per cent, staying well below the RBI's upper tolerance. Forex reserves climbed to $693 billion, liquidity conditions turned surplus, and the manufacturing PMI remained robust at 57.6, signalling sustained momentum.
May saw the highest monthly FPI inflows in eight months, while DIIs continued their net buying streak.
The market has re-rated sharply over the past year, but with forward earnings growth of 12-15 per cent, supported by private capex, corporate deleveraging, and strong domestic demand, there's fundamental backing to this optimism.
The recent terrorist event and India's swift, decisive response led to a surge in domestic confidence.
Strategically, India's firm stance against future attacks and its demonstrated military precision added to the country's geopolitical credibility.
RBI provided an extra boost to growth sentiments with a sharp rate cut and CRR cut, clearly indicating a pro-growth stance as inflation is under control.
The global backdrop is positive, and many central banks are cutting rates. Overall, financial conditions are easy and conducive for risk assets.
A deeper correction would probably be triggered by external factors rather than internal.
Trade wars, currency volatility and other geopolitical issues may impact the markets in the short term.
The midcap and small-cap segments had seen a time and price correction in the last six months. This led to valuations going from expensive to a more reasonable zone.
The earnings season has been quite good for midcaps, which has triggered the success of these and small-caps.
Most of the sectors doing well are the ones that did well in the previous run. And now, with the RBI policy, even the financials are catching up.
We continue to believe that the domestic sectors will do better than the global sectors.
We are positive on financials, industrials, selected utilities and selective consumer discretionary segments.
The other places where we see good growth on a long-term basis are segments like power transmission, distribution, railways, defence, renewables, etc.
We have been bullish on defence for quite some time and continue to do so.
We believe it is a very long-term story as the segment has just begun to emerge in the past few years.
It is not very often that you can get entry into a segment with a long runway just as the sector is beginning to open up and grow.
The key trigger is the opening up of the sector to the private sector. Now, apart from local demand, we can cater to the global defence markets, which have far larger potential.
As far as PSUs are concerned, we do not consider all PSUs as a monolithic segment.
It consists of stocks in many different sectors, and we analyse each stock on a standalone basis rather than using the same broad brush to paint all of them.
Macro fundamentals, policy clarity, and broadening sectoral participation provide a solid backdrop.
While global risks remain, India's resilience and reform-driven growth make it a compelling structural story.
Volatility may continue, but investors with a disciplined asset allocation and long-term perspective should stay invested.
We are positive on the domestic sectors compared to the global.
We are overweight on financials, industrials and underweight in consumer staples, utilities, energy and consumer discretionary.
India has the least dependence on exports as a percentage of GDP.
While there will be a global impact and India may not remain completely untouched, we believe that we will be able to tide out through the crisis with a good diplomatic approach and the strength of domestic demand.
India will continue to remain the fastest-growing large economy in the world.
Inflation is not a concern as our fiscal and monetary policy has been quite prudent.
We are seeing flows in both our funds, and even our small-cap fund is close to ₹ 1,000 crore in assets.
We follow a market-cap agnostic approach and pick and choose the best stocks across all market-cap buckets.
While the allocation changes from time to time, currently, less than 50 per cent of our portfolio is allocated to large caps.
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Read more stories by Nishant Kumar
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
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