Benchmark indices Sensex and Nifty have touched new highs despite macroeconomic concerns. What are the reasons?
Looking at only the listed market universe does not provide the actual picture of the Indian economy. A large component of GDP comes from the medium and small enterprises segment, which have been losing share to larger and organized players (typically listed companies). Surplus liquidity has meant all-time low interest rates, which have acted as a catalyst for leveraged consumption. Furthermore, India has been an outlier among emerging market peers in terms of foreign fund inflows. All these factors together have led to a sharp rally and making valuation rich for the companies.
Your outlook for 2021
Given the low interest rate scenario, the underlying recovery in the economy and improvement in corporate earnings, optimism will be high in 2021. Policy reforms undertaken in 2020 will play a significant role in placing India on the global manufactural landscape for years to come. Apart from the theme of listed and organised companies gaining market share, we foresee the adoption of technology to play a key driver of growth. This coupled with structural changes in select industries and acceleration in manufacturing would be the positives to watch out for in 2021. We remain bullish on India’s growth story from a long-term perspective.
Sectors to watch out for in 2021
We invest in sectors where we see long-term structural changes/opportunities and remain sanguine on the domestic consumption (discretionary and healthcare), private banking, logistics and IT.
Which category of funds should MFDs recommend at this juncture?
We believe asset allocation is the most important factor in determining the investment outcome. Sticking to your asset allocation and following a disciplined investment process is key to avoid taking undue risks beyond risk appetite. In my view, large and midcap funds take care of most financial goals.
