Expert view: Inflation, RBI action key triggers for Indian market; positive on power, IT, says MarketsMojo Group CEO

Expert view: Amit Golia, Group CEO of MarketsMojo, believes the Indian stock market may deliver muted returns in Samvat 2081 due to the ongoing Middle East crisis, a slowdown in the Indian economy, rising borrowing costs, and persistent inflationary pressures. In an interview with Mint, Golia says he is positive about healthcare, hospitals, power, and the IT sector. He also shares his views on mid- and small-cap sectors and investment strategies to build wealth.

Edited excerpts:

The Indian stock market saw a steep fall in October. What led to this selloff?

The steep fall in the market can be associated with FII's (foreign institutional investors) aggressively selling Indian equities worth over ₹81,000 crore in the month of October.

The FIIs were net buyers for the past four months with a net purchase of ₹1.23 lakh crore in the Indian equities, and the markets were up consecutively for the past four months, showing a clear correlation.

A probable cause for the recent selloff could be the “sell India, buy China” theme triggered by an economic stimulus announced by the Chinese government.

Another reason could be the higher inflationary print for the month of September coupled with muted consumer spending reported by several consumer companies.

What are your expectations from the Indian stock market for the new Samvat? What are the key triggers that will influence the market?

The Indian markets are expected to stay robust, with strong and increasing participation from retail investors and strong pockets of the DIIs absorbing the volume of FIIs selling.

Key triggers for the Indian market would be the October inflation and the RBI’s actions in the upcoming MPC meeting in the first week of December. Also, the markets will be closely watching the US Elections coming up in November.

Equity mutual funds have seen solid returns since last Diwali. Should we tone down our expectations for the next year?

The markets have continuously run up since COVID, with the year 2022 providing a brief pause in this rally.

As an investor, one should keep their emotions in check and know that the markets do not provide linear returns, and a period of such high returns might be followed by a sideways or bearish return.

Looking ahead, the market may encounter challenges due to the ongoing Middle East crisis, a slowdown in the Indian economy, rising borrowing costs, and persistent inflationary pressures, which could lead to muted returns.

Should we bet on mid and small-caps or wait for more corrections?

At this moment, midcaps are more expensive than small caps.

Small-cap valuations have returned to their three-year average, whereas midcap valuations are still significantly above their three-year and five-year averages.

Since October, the midcap index has fallen by 6.5 per cent compared to the small-cap index, down by 6.1 per cent.

This fall may continue as the September results have shown signs of a slowing economy.

We advise investors to be careful of highly valued stocks in both mid-caps and small-caps, as any disappointments in the September earnings could lead to sharp corrections in these stocks.

With interest rates coming down, what should be our mutual fund investment strategy?

Ideally, we would advise investors to keep investing in the market systematically.

Certain sectors, such as real estate, banks and NBFCs, telecom, and capital goods, could benefit from lower borrowing costs.

One could allocate a small portion of their funds to long-term debt funds, which benefit from falling bond yields.

Hybrid funds could also provide a balanced approach to debt and equity.

What sectors are you betting on at this juncture? Do you think value is emerging in the IT pack?

We are looking at multiple sectors, such as healthcare, hospitals, and the power sector, where we feel the demand is too strong and the supply lags behind.

This is where we feel the maximum value should emerge. Improvements have been seen in the IT sector, with the US economy reviving well, and the cost of retaining talent has come down significantly for most IT players.

The major IT players are looking to develop their AI capabilities, and a lot of talent is being deployed to this technology to offer innovative solutions to their clients. This should open up a new avenue of growth for the IT companies.

What are the keys to building wealth? What are some crucial things one must consider before investing?

Building wealth requires a combination of discipline, strategic planning, and informed decision-making. Here are some key considerations:

Financial discipline: Consistently saving and setting aside funds for investment is foundational. Establishing a habit of regular investment will support long-term wealth accumulation, even during volatile market phases.

Avoiding leverage: Using borrowed funds to invest in equities can amplify losses, especially in market downturns. Leverage often comes with high-interest costs, which can reduce or even eliminate returns from equity investments. It’s usually wise to clear high-interest debts before focusing on equity investments.

Long-term perspective: Equity investments are best suited for long-term goals due to their non-linear returns. Staying invested and avoiding impulsive decisions, especially during market downturns, allows for the potential benefits of compounding over time.

Systematic investment in the right assets: Carefully selecting industries and stocks with strong long-term growth potential can maximize returns. A systematic approach, such as investing in regular intervals (e.g., monthly), helps mitigate the risks of market volatility and fosters compounding gains over time.

Risk tolerance and diversification: Understanding your risk tolerance and spreading investments across various sectors or asset classes reduces exposure to the risks associated with a single investment.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.