Geopolitical concerns, rising crude oil prices, and spikes in US treasury yields are raising caution in equity markets. Akhil Chaturvedi, Chief Business Officer at Motilal Oswal Asset Management Company, does not believe that these concerns will have a lasting impact on the markets. While short-term volatility is possible, India’s macroeconomic factors remain stable, earnings growth is robust, and domestic liquidity is strong. Chaturvedi also discusses the potential long-term implications of geopolitical concerns on the commodity cycle, advises caution when selecting funds, shares expectations for September quarter earnings, discusses the performance of PSU stocks, and highlights sectors to watch during the World Cup and festive season.
Geopolitical concerns often raise questions about the long-term implications for commodities, specifically oil. While there hasn’t been a substantial impact yet, disruptions could occur due to factors like US restrictions on Iranian oil exports or disruptions in the Strait of Hormuz. However, the Indian economy is in a position to withstand oil prices up to USD 80 per barrel, and the inclusion of India in JPM bond indices could bring significant incremental FPI flows. Chaturvedi believes that unless oil prices surpass USD 100 per barrel, the economy’s growth momentum won’t be significantly dampened.
The substantial growth in SIP flows, exceeding Rs 16,000 crores or $2 billion, is exciting for the MF industry and equity markets. Chaturvedi expects these flows to continue growing due to greater industry awareness. When it comes to fund selection, he advises caution and suggests investing in a new fund offering (NFO) only if it fills a specific need in one’s portfolio. He also emphasizes the importance of seeking advice from financial experts if uncertain.
Chaturvedi expects Nifty earnings to grow by 21% YoY in 2QFY24. Domestic cyclicals like BFSI and Auto are projected to drive overall earnings growth, while O&G earnings are expected to surge 2.2x YoY. The metals sector is likely to report a 6% YoY earnings growth, while Cement, Healthcare, and Technology sectors are expected to show moderate earnings growth in the quarter.
Regarding the performance of value and growth stocks, Chaturvedi notes that both styles have been in traction this year. While value stocks have performed well in the last two years, this year has also seen growth stocks picking up. Chaturvedi advises investors to balance their portfolios across value and growth rather than timing one over the other.
In terms of positioning for the rest of the year, Chaturvedi’s portfolios are focused on growth themes such as retail-focused lenders, insurance, healthcare, high-end consumer discretionary businesses, and manufacturing. He believes that sectors in consumer discretionary can see a demand uptick from big events like the ICC Cricket World Cup and the festive season. Additionally, Chaturvedi is bullish on lenders, as valuations in the banking sector are reasonable, and asset quality remains healthy.
In conclusion, Chaturvedi highlights the volatility in equity markets due to geopolitical concerns but remains optimistic about India’s stable macroeconomic factors, robust earnings growth, and strong domestic liquidity. He advises caution in fund selection, shares expectations for September quarter earnings, discusses the performance of PSU stocks, and identifies sectors that could benefit from upcoming events like the World Cup and festive season. Please note that the views expressed in this interview are those of Akhil Chaturvedi and do not represent the views of the Economic Times.
