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September was an interesting month for equity markets. Both Nifty and Sensex broke their all-time high records. Following the trajectory, midcap and smallcap indices scaled fresh highs.
Will the trend continue? Let’s understand this from experts - Neelotpal Sahai of HSBC MF, Niket Shah of Motilal Oswal MF and Ravi Gopalakrishnan of Sundaram MF who share with us their equity outlook.
Neelotpal Sahai, Director Indian Equities and Head Offshore Advisory, HSBC Mutual Fund 
Outlook
- Strong government thrust on infrastructure spending is clearly supporting the economy and has been one of the big positive contributors to the GDP growth of first quarter
- Impact of interest rate increase cycle could result in negative growth for the global economy going forward. However, there is a low likelihood of further interest rate increases
- The major headwinds include fluctuations in US Fed policy as Fed has continued to tighten policy rates even as core inflation is starting to soften which could lead to volatile equities
- The positives for the Indian market include increased government infrastructure spending and recovery in private capex and real estate cycle
- In terms of valuations, mid and small caps are higher than their historical averages
Sectors
- Sectors like healthcare, real estate and financials (lenders) are expected to perform well.
Recommendation
- Investors with a higher risk appetite along with a longer investment horizon can consider flexi-cap / focused funds
- Investors with a lower risk appetite can consider multi-asset hybrid funds
Niket Shah, Fund Manager, Motilal Oswal Mutual Fund 
Outlook
- As exports remain weak, the sharp slowdown in government tax could lead to moderation on the growth front. Secondly, the rise in crude oil prices along with the sharp surge in global rates could pose risks to India’s balance of payments
- In the near-term, equity markets could remain in consolidation mode owing to high valuation in midcaps and small caps
- The major triggers for the market will be the earnings season, global inflation, fed commentary, global interest rates and elections
- Valuations are reasonable in largecaps. However, mid and smallcap valuations at the index level seem quite expensive
Sectors
- The sectors that are expected to perform well are private banks, domestic auto and consumer discretionary space
Recommendation
- Given the high valuations markets are trading at and given macro concerns, one must move from smallcaps to multicap or midcaps where risk reward is favourable with lower risk.
Ravi Gopalakrishnan, CIO-Equity, Sundaram Mutual Fund 
Outlook
- With elevated interest rates across global markets and a slowing Chinese economy, global growth is expected to remain soft in the near-term
- In the near-term, rising energy prices and any risk of sticky core inflation would be the risks to monitor for impact on trade deficit, currency and corporate profitability
- Markets would be looking forward to signs of policy continuity after 2024 elections. This has given confidence to the current upcycle in investments from the private sector
- Valuations in certain pockets of mid & small caps indicate elevated expectations, hinting at possible phases of volatility or consolidation ahead
Sectors
- Industrials, financial services and consumer discretionary sectors are expected to do well
Recommendation
- A well-diversified portfolio with a blend of exposure to good growth businesses across cap-curves, especially flexi cap/multicap categories would be apt for a longer-term investment horizon
