ETMarkets Smart Talk: Sahil Kapoor expects metals & globally linked sectors to consolidate in FY24

In an interview with ETMarkets, Kapoor who has 14 years ago as a discretionary trader at Edelweiss markets desk and moved on to Wealth Management said: “We expect metals and globally linked sectors to continue to consolidate or correct,” Edited excerpts:

We are down by about 10% from highs. What is your take on markets amid global headwinds for FY24?
India was amongst the most expensive markets in most of CY22. India was trading at a 90% premium to its emerging market (EMs) peers six months ago.

A 10% correction in Indian stocks, a sharp rally in EM peers, and a catch-up in earnings have reduced this premium.

The Nifty Index is now trading at valuations close to its long-term average versus the emerging markets. This means that the headwinds from active foreign investors due to the relative expensiveness of the Indian market are no longer valid.

We expect better foreign investment (FII) flows into India based on relative valuations. This is likely to help India perform better than it has done in the last 18 months. Global headwinds will continue to provide volatility to local markets.

As we step into FY24 – which sectors are likely to be in the leader and laggard category?
We are overweight on Banking, healthcare, select consumer names in Auto and auto ancillary and engineering and infrastructure space. We expect metals and globally linked sectors to continue to consolidate or correct.

What is your take on SEBI changes made recently on AIF, Debt market, disclosure norms, ESG. What message does it give out to the wider investor community?
The regulators over time have strengthened the asset management industry with an investor focus. These changes would help bolster the investor’s confidence in the industry.

Do you feel fears of the global recession in FY24 are real? If yes, how will it impact India and India Inc. in terms of earnings?
The risk of growth in the West is rising. With interest rates are decadal highs and economic activity slowing, it is likely that developed markets will see a period of poor or declining growth.

In this cycle, the global economy is not in sync. Unlike the past few crises where most countries will witness growth and slowdown cycles together, the synchronicity is absent now.

For instance, the EU economy is already nearly in recession, the US is gradually seeing a growth slowdown while China is just about recovering from a 3-year economic malaise. India is also witnessing steady growth dynamics.

These many tracks of recovery is likely to blunt the impact of country-specific economic weakness on India.

More than 50% of the smallcap stocks are down more than 60% from their 52-week high. Does this mean that this space could see a rebound in FY24?
The valuations and performance froth from smallcap have been washed off in the last 18 months of correction. The broader market, including midcaps & small-cap, are likely to do well over the next few years.

We are seeing a gradual fall in SIP – is it attractive FD rates or equity markets being rangebound?
The total SIP inflows measured by net inflows in INR cr remain robust. Market volatility usually causes these numbers to become volatile, however, we haven’t seen any meaningful slowdown in overall numbers for now.

What would be the ideal asset allocation for someone who just started earnings with say Rs 12 lakh per annum? How can he/she start a crorepati journey? Will SIP work and what is the kind of saving that needs to be made every month?
A well-diversified multi-asset portfolio could be the focus. An equal-weighted strategy between Indian stocks, global stocks, Gold and Indian debt has delivered nearly 12% compounding over the last 25 years.

In consultation with a financial advisor, an investor should aim to create a less volatile portfolio. If the performance of the past can be replicated a period of 25 years of steady SIP investments can generate the required corpus.

What are your key learnings from FY23?
Don’t buy expensive companies.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)