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October saw the Indian equity markets go under a correction. This is due to record outflows from India markets.
What’s next for November? We spoke a few experts to understand what to expect.
Chandraprakash Padiyar, Senior Fund Manager, Tata Mutual Fund
Higher valuations are the prime reason for the short-term correction. Equity markets have been moving higher consistently leading to higher expectations. Stock prices have started building long term positive outlook without taking into account short term earnings volatility. We are optimistic on the long-term outlook.
Indian economy is likely to continue to grow at a steady pace led by corporate capex (specially energy transition), real estate, bank credit picking up. Corporate earnings growth is likely to be better given the base for the second half of FY 25 and FY26. We also expect earnings delivery by banks to improve for FY26.
Valuations for large cap part of the market remains reasonable whereas mid cap and small cap segment is on the higher side. We see ingredients in place for a positive next few years for the markets with the large cap segment doing better than mid cap and small caps.
Recommended funds
- Diversified funds with bias towards bottom-up stocks. Stock selection should lead to better performance over passive investing
Recommended sectors
- Financials and banks
George Thomas, Fund Manager – Equity, Quantum Mutual Fund
While US markets are doing well due to increase in manufacturing activities, China expects positive outcome from the stimulus package introduced by the government.
There are signs of softening in consumption, particularly in FMCG sectors, affecting valuation assessments.
Notable stress in banks, especially in microfinance, affecting certain players.
Current market valuations are under pressure, with limited signs of recovery. Demand revival is needed for further earnings growth.
In our view, there will be no major rally in the market due to high valuation. Hence, investors should moderate their returns expectation.
Funds emphasizing reasonable valuations are likely to outperform amid high valuations and market sensitivity to earnings disappointments.
Recommended funds
- Large cap funds
Recommended Sectors
- Private sector banks
R Janakiraman, CIO, Emerging Market Equities, Franklin Templeton India AMC
Significant action by governments and regulators worldwide has been a key theme this month. The recent policy announcements in China do not directly address the structural headwinds faced. While short-term growth may be seen, long-term remains uncertain.
The 50 basis-point US cut aims to keep pace with economic conditions. While the economy shows strong growth and labor expansion, the focus now turns to the extent of further cuts. The larger-than-expected cut raises questions about whether the Fed anticipates a slowdown. Upcoming employment data will be crucial to gauge any significant economic weakening.
In India, domestic markets have been supported by government policy actions that continue to drive the capex rally. Since the June election results, policy continuity has been evident, with ongoing investments in physical and social infrastructure.
Oil prices are volatile due to rising tensions in the Middle East, which is important for India given its reliance on imports. A sharp increase in prices could have a significant impact. GST collections have slowed, with year-on-year growth at 6.5% in September.
Valuations have moved up and Indian equities continue to remain exciting due to their long-term growth prospects. India is also in the early stages of a pick-up in the private capex cycle backed by strong corporate balance sheets and government support.
Recommended funds
- Diversified allocations and regular portfolio rebalancing to navigate potential risks ahead
Recommended sectors
- Financials
- IT
- Autos
- Construction
- Consumer services
Sorbh Gupta, Senior Fund Manager – Equities, Bajaj Finserv AMC
Fiscal and monetary stimulus announcement in China in the first week of October has pushed global emerging markets.
ETFs & hedge funds to move allocation from India to reduce underweight stance on China. This has resulted in US$ 12 bn outflows month to date (highest ever on record). There is a possibility of some reallocation of investments from India to China by emerging markets funds. Domestic flows have acted as key counter balance to FPI outflows in recent times.
Quarterly earnings have been on a tad weaker side with prolonged monsoon, general elections & union budget keeping expectations reduced. More clarity will emerge by the end of the month once company reported earnings come in.
Recommended Funds
- Balance advantage funds
- Multi asset allocation funds
Recommended Sectors
- Consumer staples
- Mass consumption
- Consumer discretionary
- Pharma space
- Large private banks
- Private insurance space
