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Amidst a correction phase, geo-political uncertainties, new administration in the USA and the continuous outflows by foreign investors, fund managers are very cautious about the outlook of the equity market.
In February, fund managers said they will prefer large cap stocks or stocks with strong and stable fundamentals over the mid & small cap stocks. Let us look at what they have to say about February 2025:
Rahul Singh, Chief Investment Officer, Tata Mutual Fund
Rahul said that the quarterly results of December and the policies of newly-elected USA President Donald Trump will shape the equity outlook of the global and Indian markets in February.
He said that the support provided to consumption and manufacturing in the Budget 2025 will make the Indian market more balanced across sectors.
Talking about favorable sectors for the investors, Rahul said that apart from the financial services and banking sector, there is no specific sector that may outperform the overall industry.
Rahul said that the large cap stocks should perform better compared to mid and small small-cap stocks as they are more overvalued than the large cap stocks.
Sandipan Roy, CIO, Motilal Oswal Private Wealth
Sandipan said that geo-political factors and upcoming policies of Donald Trump administration will be the major driving force for the equity markets in February.
He said that Motilal Oswal MF is cautious about the mid & small-cap stocks as they are overvalued. The fund house recommends investors to invest in the large cap stocks with strong fundamentals because this is going to be a year of stock accumulation.
Because of the focus of the Union Budget on the middle class, businesses like quick commerce and the fashion & apparel retailers may witness an uptick in their businesses.
Further, the middle-class population having extra money in their hand to spend may result in the growth of financial services as they will be focused on using this money for maintaining their expenses and loans.
Sorbh Gupta, Senior Fund Manager- Equities, Bajaj Finserv Mutual Fund
Sorbh said that the equity markets in January reacted to changes in US leadership. Continuous FPI outflows and mixed earning results for Q3 have also affected the market.
However, the capex and consumption push by the government in the Union Budget will boost some section of Indian markets.
He said that the equity markets have seen a reasonable correction in the last few months. However, investors should steer clear of pockets of frothy valuations. Over medium-term, equity markets should reflect the growth in earnings of corporate India.
Commenting on the investment strategy, he said that well-diversified equity funds like flexi cap funds or multi cap funds are good instruments for wealth creation over the long term. However, the conservative investors, who are new to equity markets, can start their investment journey with a well-managed multi asset allocation fund or balance advantage fund.