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Business News/ Markets / Stock Markets/  Expert view: It's a good time to enter the market; one can look at banking, defence, retail, says Hemant Sood of Findoc

Expert view: It's a good time to enter the market; one can look at banking, defence, retail, says Hemant Sood of Findoc

Expert view: Hemant Sood, MD of Findoc, optimistic about the Indian stock market, suggests buying on dips for potential double-digit returns but warns of overvaluation. Diversification is key for equity investments.

Expert view: Hemant Sood, the managing director of Findoc, is positive about the prospects of the Indian stock market. (Findoc)Premium
Expert view: Hemant Sood, the managing director of Findoc, is positive about the prospects of the Indian stock market. (Findoc)

Hemant Sood, the managing director of Findoc, is positive about the prospects of the Indian stock market. Sood says this could be a good time to enter the market and suggests buying on dips to average out the portfolio's overall performance. He adds that there is huge potential for a double-digit return this year, but this cannot be guaranteed due to overvaluation. In an interview with LiveMint, Sood also shared his views on various sectors and the broader economy. Edited excerpts:

What should be the strategy for equity investment for the next six months? Can we expect Nifty to give double-digit gains this year?

Equity investments are made over a long period of time. They are meant to create wealth, enhance purchasing power, and beat inflation. 

Markets tend to be extremely volatile in the current market scenario, but India's growth story is extremely positive in the coming times and near future. 

This could be a good time to enter the market, and even buying on dips is suggested to average out the portfolio's overall performance. 

At the same time, before making any investments, one must be extremely cautious and understand the risks of any investment made in the market. 

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Any individual must evaluate his/her own risk appetite and invest accordingly in the market to attain financial goals. 

Diversification is the key. As an overall portfolio of equities, one must invest across various sectors and different companies to accomplish maximum benefits and gains, as a loss in one investment could be compensated by profit in another instead of putting all the money in one stock. 

Hence, six months is a short period, and the focus should be on large caps instead of mid and small caps as they are highly risky. 

One can also focus on good-performing sectors like banking, defence or retail. 

Lastly, Nifty is trading around its all-time high and is on a higher valuation side; various corrections are seen in the market. 

It could be said that optimism in the market growth is evident this financial year, and there is huge potential for double-digit returns, but this cannot be guaranteed due to overvaluation.

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What is your view on the banking space? What should one buy from the sector?

In 2024, the Indian banking sector will present a landscape of recovery and growth, boosted by a robust foundation laid in the preceding years. 

The sector has witnessed a significant transformation, marked by a decline in bad loans, improved profitability, and stronger capital positions, particularly among public sector banks. 

These developments have resulted in an aggregate profit increase and a reduction in non-performing assets to multi-decade lows, signalling a focused effort on risk management and debt recovery. 

The capital adequacy ratios, especially for public sector banks, have cushioned against potential risks, allowing for future expansion. 

The cumulative profits of public sector banks crossed 1.4 trillion in the fiscal year ended March 2024, a 35 per cent rise from the previous year’s high of 1 trillion. 

This financial stability is further supported by sustained credit growth, increased digital adoption, and government policies conducive to the sector's revitalisation. 

However, the Indian banking space in 2024 is not without its challenges. 

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Global economic volatility remains a concern, potentially impacting export-oriented industries and loan repayment capabilities. 

The threat of rising interest rates and competition from active fin-tech entities necessitates adaptability and innovation within the sector. 

Stress in sectors such as MSMEs and agriculture demands targeted interventions, while the increased reliance on technology exposes banks to heightened cybersecurity threats. 

Despite these challenges, the sector's emphasis on technology and infrastructure investments creates avenues for growth, and stable interest rates, a robust GDP, and declining inflation are expected to influence lending and deposit activities positively. 

From an investment perspective, India's banking sector offers various opportunities. 

It should be wise to focus on banks with strong financial health, growth prospects, and competitive positioning. 

The digital lending market in India has experienced notable growth. 

Certain banks stand out for retail investors looking to benefit from this expanding sector based on their financial performances and adaptability to cutting-edge technology over the years. 

When considering investments in the Indian banking sector, conducting thorough research and staying informed about regulatory changes and macroeconomic indicators is essential. 

The sector's growth trajectory is influenced by factors, including loan demand, global competitiveness, and the ability to adapt to evolving economic dynamics. 

Investors should assess individual banks' financial health, market positioning, and technological advancements before making investment decisions. 

With careful consideration and strategic selection, the banking sector in India can offer promising returns for those looking to invest in 2024.

FMCG companies have pinned hopes on rural demand amid the prospects of a normal monsoon. What are your favourite picks from the FMCG sector?

The Indian FMCG sector is poised for a significant upsurge in 2024, sustained by the anticipation of a normal monsoon, which is expected to boost rural demand. 

This sector, which includes companies that produce fast-moving consumer goods, is often seen as a reliable indicator of the country's economic health due to its close ties with the agriculture sector and consumer spending patterns. 

Rural areas are critical for FMCG companies as they account for a substantial portion of sales. A normal monsoon yields a better harvest, increasing rural income and spending power. 

This is particularly important after the challenges faced in 2023, including weaker-than-expected festive demand and unseasonal rains. 

With the prospects of a normal monsoon in 2024, companies are optimistic about a revival in rural demand, which could lead to volume-led growth and a boost in sales. 

In fiscal 2023, the consumption gap between urban and rural markets was narrowed for the first time, resulting in strong rural growth of 5.8 per cent after the urban growth of 6.8 per cent. 

Specifically, the north and west regions contributed to this trend. 

FMCG companies are likely to increase their pace of innovation and premiumisation to further leverage the potential rural demand. 

They may also focus on expanding the quality of rural distribution. 

This could involve launching new products tailored to rural consumers' preferences and price points and enhancing distribution channels to deepen market penetration. 

Additionally, the FMCG sector is also expecting an expansion of profit margins due to the softening of commodity inflation, which would result in increased spending on branding and promotional schemes. 

This is likely to attract more consumers and drive sales. 

A double-digit growth for the sector, with higher volumes and market share gains, especially in rural areas, is expected by the end of this fiscal. 

The long-term outlook for the Indian FMCG sector remains positive. 

The overall trajectory is set to improve with the economy in a sound position and inflation largely under control. 

As rural incomes rise and consumer confidence returns, FMCG companies that have strategically positioned themselves to meet the needs of rural consumers are likely to see sustained growth. 

This makes the FMCG sector an attractive area for investment and innovation in the coming years.

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How do you see the latest inflation and growth trends? Should we expect rate cuts this year?

Any developing economy having an inflation rate between 3-4 per cent is considered healthy. 

On average, India has been experiencing moderate inflation, around a 6 per cent growth rate, barring a rare situation where the rate peaked at around 7.5 per cent in 2022. 

The desired range set by RBI for inflation is between 2-6 per cent, and the projection for FY25 is 4.5 per cent. 

This number was accomplished very well by India in the year gone by, where we stood at a rate of around 4.4 per cent which is on the lower side and extremely beneficial for the Indian economy. 

Furthermore, the growth story is on the cards for our country. 

The desired inflation is also intact, where in the month of April, the inflation rate was at 4.83 per cent, which is in the specified range and looking at various initiatives taken by the government, like buffer stock and procurement and monetary policies implemented by RBI it will reduce further in the coming time. 

Furthermore, rate cuts were expected to be put into action in the current quarter by 0.5-0.75 per cent, which were put on hold due to geopolitical tension and global rates being the same. 

At the same time, rate cuts are expected late in the year, probably next quarter, and could be around 0.25 -0.5 per cent. 

Also Read: April CPI inflation hits an 11-month low; can RBI cut rates in the near future? Experts weigh in

The major reason for the following action would be a decline in inflation plus rate cuts, which would ensure more money is pumped into the market. 

Government bonds, securities and debt funds would ensure better returns, further boosting our country's GDP and enhancing economic growth.

How to play the IT sector? Should we stick to only large-cap IT stocks?

Investing in the Indian IT sector in 2024 requires a strategic approach, considering its growth trajectory and the broader economic context. 

The Indian IT sector has been a significant contributor to the country's GDP and is known for its export-driven revenue model. 

As of 2024, the sector is expected to continue its growth, driven by digital transformation, increased global IT spending, and the adoption of new technologies such as artificial intelligence and cloud services. 

Investors looking to capitalise on this growth have various options, including large-cap IT stocks and shares of well-established IT companies with a history of stable performance and consistent revenue growth. 

Large-cap IT stocks offer several advantages for investors. 

They are typically more stable and mature investments, with lower volatility than mid-cap and small-cap stocks. 

These companies often have a proven track record and solid financials and are less susceptible to market fluctuations. 

Moreover, large-cap IT companies frequently pay dividends, providing an additional income stream for investors. 

This stability and potential for regular income make large-cap IT stocks safer, especially for those with a lower risk appetite. 

However, focusing solely on large-cap IT stocks may not be the best strategy for all investors. 

While these stocks offer stability and dividends, they may have less growth potential than their smaller counterparts. 

Diversifying into mid-cap or small-cap IT stocks could benefit investors seeking higher growth rates and willing to take on more risk. 

If they successfully scale their operations and capture market share, these companies could be at the forefront of innovation and offer higher returns. 

To wrap up, playing the Indian IT sector in 2024 involves a balanced approach. 

Large-cap IT stocks should form the foundation of an IT-focused investment portfolio due to their stability and potential for dividend income. 

However, investors should not overlook the growth potential of mid-cap and small-cap IT stocks, which can offer higher returns. 

Diversification across different market capitalisations can help mitigate risk while allowing investors to benefit from the growth opportunities within the Indian IT sector. 

It's essential to conduct thorough research and consider the overall market conditions before making investment decisions.

How do you see India Inc.'s March quarter performance? What are some notable upgrades and downgrades?

FY24 ended on a positive note, but it was not the best quarter performance. 

GDP growth is expected to be around 8 per cent for the March Quarter. 

Moving on, there was a slight dip in exports year-on-year. 

Having said that, GST collection is growing prominently. The total collection is around 1.80 lakh crore, about 12 per cent higher than the previous year's same quarter. 

Talking about specific sectors performing well makes banking and auto a very lucrative investment due to healthy fundamentals. 

Simultaneously, the government aims to focus on sectors like defence and renewable energy, which have performed well and have huge potential to grow in the future. 

Rural consumption is currently subdued, and not much growth is seen in such a sector.

Read all market-related news here

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.

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Published: 21 May 2024, 01:39 PM IST
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