Market return to be muted in near term; manufacturing theme attractive: Chandraprakash Padiyar of Tata Mutual Fund
2 min read 10 May 2023, 02:51 PM ISTChandraprakash Padiyar believes valuation for some segment of the market remains on the higher side and hence return expectations in the near term is likely to be muted.
PremiumChandraprakash Padiyar, Senior Fund Manager at Tata Mutual Fund believes the slowdown in the US will have some impact on the Indian economy also. He said the market may remain muted for the short term and one should monitor the demand environment later this calendar year.
Edited excerpts:
What is your assessment of the current market situation? Is the worst in terms of rate hikes, inflation, and economic slowdown behind us?
For India's economic assessment, crude price is the biggest variable to track. Given that crude prices are rangebound, I would say that the outlook for India may be favourable.
Economic growth is showing signs of a slowdown in the US and can be seen in Indian businesses exporting to the US market.
Our interaction with various exporters out of India does suggest some slowdown in orders at least in the very near term i.e. next 3-6 months.
From an equity market perspective valuation for some segment of the market especially mid-caps remain on the higher side and hence return expectations in the near term is likely to be muted.
What are your thoughts on the Q4FY23 earnings?
Q4FY23 earnings to date are quite healthy with consensus expectations being upgraded led by banks and the auto sector.
What sectors are you positive about? Can we take a contra bet on the IT sector at this juncture?
We are optimistic about manufacturing as a theme. Within sectors, we believe banks, auto ancillaries, speciality chemicals, pharmaceuticals CDMO, telecom, capital goods/engineering, industrials, and real estate are some of the sectors which have a positive risk reward.
The global economic slowdown is likely to remain a headwind for the IT sector over the next 12 months.
Valuations have come down reflecting the headwinds and may see time correction till the earnings outlook improves.
India's economic outlook appears bright. Do you see any concern which can derail economic recovery?
As mentioned earlier, for India the key variable to track is Crude prices which can impact the outlook materially. Apart from this, one needs to monitor the upcoming monsoon season in the near term.
When do you expect a cut in rates by the Fed and RBI?
Bond markets are already reflecting rates lower than the policy rates and hence incrementally predicting central bank actions in terms of timing would not have any impact on the markets.
The current inventory cycle-led commodity price correction may see another spike when/if demand normalises in 2024.
Hence though the short-term outlook on rates is for a pause, one needs to monitor the demand environment later this calendar year.
Disclaimer: The views and recommendations given in this article are those of the expert. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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