Domestic participation boosts Indian markets despite FII outflows, says Sachin Jasuja of Centricity

The current economic reforms have also been supporting the growth of businesses. All things considered, GDP is predicted to be resilient and steady even though shocks to the food and oil supplies can keep inflation high, says Sachin Jasuja, Head - Equities, Centricity.

In an interview with MintGenie, Jasuja said that the best way is to build a portfolio including both, with the right mix, according to the market conditions, valuations, and economic conditions after considering the risk appetites in a staggered manner.

Edited Excerpts:

In which sectors do you foresee emerging opportunities for investors?

Green Energy: India's commitment to decarbonization and renewable energy targets presents an attractive opportunity for solar, wind, and other renewable energy companies. Additionally, companies promoting energy efficiency and sustainability solutions could gain traction. India is likely to witness an investment of around 15 billion dollars.

Infrastructure: The government's continued focus on infrastructure development, including roads, railways, ports, and renewable energy, is expected to propel this sector. Companies involved in construction materials, engineering, and renewable energy solutions could benefit. The government is planning to double its investments in Infra in the next seven to eight years.

Microfinance: The microfinance space is seeing robust credit growth momentum driven by the continued traction in the Retail and SME segments. The growing economy and awareness of finance will push the sector ahead. 

What is your overall view on the Indian equity market? Which sectors do you think would be bullish & and bearish in the long run?

With a growing economy, India seems to be in a bull run in the long term. Easing and inviting foreign investments in the country will act as an auxiliary to the booming markets. Green Energy, Infrastructure, Microfinance, IT and Healthcare are growing sectors. The media and entertainment industry may have challenging times ahead as dynamics are changing. 

In which sectors do you foresee investment opportunities for HNIs and UHNIs in equity markets?

With increasing digitalization and technology in finance, it has a greater scope to expand and favourable opportunities for investments. Renewables, fintech, engineering, and infrastructure should attract investments from HNIs and UHNIs. 

Looking at the current market scenario, what is your take on the right asset mix between active and passive investments today?

The best way is to build a portfolio including both, with the right mix, according to the market conditions, valuations, and economic conditions after considering the risk appetites in a staggered manner. But passive investments are gaining attraction in India now. As we know, active funds are majorly selected to prioritize selective investments and alpha it can generate but they also come with a degree of risk as per the market conditions. Passive funds generally follow the index, which can also give negative returns if the markets give a down-move.

Given the growing contrast seen in FII and DII flows, what pulse do you read of the Indian investors?

In recent market developments, domestic participation has increased the depth of the markets. Even though foreign institutional investors (FIIs) have offloaded almost $ 30 bn but still markets continued to make all-time highs on the back of strong DII and retail participation.

Is India’s growth story intact given the fact it’s election year? What is your sense of global sentiment?

The majority of government rules have always aided economic performance. The current economic reforms have also been supporting the growth of businesses. All things considered, GDP is predicted to be resilient and steady even though shocks to the food and oil supplies can keep inflation high. The current economic reforms have also been supporting the growth of businesses. Direct tax collection has also been at its highest, reaffirming the strong support by the public in the government.

Moreover, when we talk about global sentiments, India is one of the most optimistic markets compared to other economies when it comes to consumer sentiment.  

Speaking about global sentiment, the inflationary environment persists but the inflation in U.S/Europe has been cooling off as well. Fed also suggests a cut in interest rates, but we’ll have to see how that aligns with the markets in 2024. 

Corporate earnings growth in FY24 has been strong at double digits, driven largely by the domestic-oriented sectors. Which sectors would continue to demonstrate such growth? Additionally, any sectors you are cautious of?

Sectors that we feel can demonstrate similar growth, are infrastructure, power, energy, and consumption as the foreseeable interest rate cuts can increase liquidity in the hands of the consumers. The companies have been growing at a CAGR of 15-20% which is a decent and healthy growth in businesses. With an uptick in consumption, infrastructure, and discretionary spending, the demand for goods and services looks to increase in the coming years, provided we do not face a global slowdown. The Information Technology sector can also rebound in the coming quarters, with an uptick in global clients, as demand increases for services. 

We are currently cautious on chemical and selective BFSI themes as now, the numbers look like the margins and growth could consolidate but the overall corporate cycle will remain on an uptick. 

In light of current global economic conditions, how should investors adjust their investment strategies to navigate uncertainties and capitalise on emerging opportunities?

The earnings growth has been supporting market valuations. We feel major indices like the Nifty still trade at reasonable valuations. We expect further EPS growth of 15-16% in FY24-25 so at the forward level, Valuations of Nifty 50 is at a P/E of 21-22 which can still offer lot of value at this level. 

While mid-cap and small-caps have been rallied quite aggressively in the past few months we need to be cautious in this space on a broader level. So, a conservative approach in equities should be followed in the coming quarters to navigate uncertainties. To capitalize on emerging opportunities, staggered investments feel like the way to go.

Considering the ongoing climate crisis, what role does sustainability play in investment decisions?

Climate change is a grave factor and a serious situation that we currently live in, sustainability should be a part of investments through investing in companies that are promoting and implementing green methods to function, for example in the metal sector, a lot of firms have now adopted a concept called ‘green steel’ which emits the carbon emissions and focuses on a more sustainable operating method, supporting India’s mission to be net zero emissions by 2030. Ethanol blending is also into play, with a preponed target of 2025 by the country’s government and major companies are benefiting from it.

Considering the uncertainties, how important is portfolio diversification for investors, and what strategies would you recommend to enhance portfolio resilience?

Portfolio diversification should always be the key priority for an investor, and the mix between equity (direct stocks and mutual funds) and debt should be according to the financial goals, risk appetite and the age of the investor. An investor should be executing their decisions like a machine, and not get carried away by the emotions, or the market rally/crashes.