Nifty 50 may deliver returns ranging from 12-18% over the next year, says Manish Goel of Research & Ranking

Manish Goel, Founder & MD, Research & Ranking believes Nifty EPS (earnings per share) growth may maintain a compound annual growth rate (CAGR) of 12-13 per cent between FY24 and FY26. In an interview with Mint, Goel shared his views on mid and small-cap spaces and what could be the next major triggers for the market. Edited excerpts:

What is your view on the current market structure? Should we buy or wait for some more correction?

One should ensure that their investment strategy matches their investment horizon and risk tolerance.

For long-term investors with a horizon of two to three years or more, there's little cause for concern.

This timeframe allows us to focus on the bigger picture: solid companies, a growing economy, and the overall potential for long-term gains. Hence, you can continue to invest selectively.

Even for those with a shorter-term outlook, say a year, I believe markets can provide decent upside potential.

Considering the solid economic foundation and positive domestic demand environment, we anticipate Nifty EPS growth to maintain a compound annual growth rate (CAGR) of 12-13 per cent between FY24 and FY26.

Taking into account the long-term average PE multiples of 20-21 times for the market, we can reasonably expect Nifty to deliver returns ranging from 12-18 per cent over the next year alone.

Moreover, true power lies in personalisation. Things can improve if one partner with a skilled investment advisor who can align the curated portfolios to their unique goals and risk tolerance.

They can help one overcome the ups and downs and maximise their potential for success. It is not about avoiding all risk but managing it wisely.

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What should be our strategy for mid and small-caps? Should we trim our exposure to them and add more large caps?

While it is true that Nifty has delivered a solid 22 per cent return in the past year, it is worth noting that smaller and mid-sized companies have stolen the show.

The Nifty midcap and small-cap indices have skyrocketed by over 55 per cent.

However, given that valuations are getting a bit stretched in these areas, we advise sticking with one’s current investments instead of adding more.

Selling in anticipation of a market correction is tempting, but nailing the timing is tricky.

So, we recommend holding off on making any extra purchases.

Depending on how comfortable one is with risk, consider keeping the overall exposure in small and midcaps to around 60 per cent if one is feeling aggressive, 50 per cent for a moderate approach, and 30-40 per cent for a lower-risk strategy.

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Most positives are already discounted in the market. What could be the next major triggers for the market?

On the contrary, the opposite is true. While many risks are already priced into the market, plenty of positive factors could surprise investors.

On a macroeconomic level, India is on a winning streak. Despite surrounding negativity, we are consistently hitting boundaries with each ball.

We have a stable government, forward-thinking policies, strong domestic demand, and resilient macroeconomic indicators.

Healthy corporate earnings, reduced corporate debt-to-GDP ratios compared to previous years, a robust banking sector with 19-20 per cent credit growth and minimal NPAs, well-capitalised financial institutions, sustained government expenditure, manageable inflation, and a strong case for potential interest rate cuts all signal India's solid and robust domestic potential.

We believe that chances of better-than-expected performance on many of these indicators are possible, thereby positively impacting investor sentiments.

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When do you expect the Fed to cut rates? Would you say one should focus more on domestic fundamentals and less on the US Fed?

While the US focuses on taming inflation from its current 3 per cent to the 2 per cent target before considering rate cuts, current GDP growth and declining CPI trends have the markets buzzing about a potential Fed rate cut cycle kicking off later this year.

Our robust fundamentals deserve our full attention. Let's keep our eyes on the internal factors propelling our economy and base our investment decisions accordingly.

Also Read: Nifty 50, midcap, smallcap indices, most sectors overvalued, says HDFC Securities; advocates bottom-up stock picking

What is your outlook for the domestic economy? How could investors reap the benefit of India's rapid growth?

Let's break it down into two parts. In the short term, major agencies like the RBI and the IMF forecast at least a 7 per cent annual growth in GDP.

We are already known as the fastest-growing large economy globally, and honestly, I don't see any other nation stepping up to challenge us in the next few years.

Even looking ahead to 10-15 years, I still don't see any other country with all the structural advantages we have today. In a world where many nations are ageing rapidly, we will remain the youngest for at least the next 35 years.

We are on the brink of a consumption boom with per capita income rising and more discretionary spending happening.

It is like what we saw in the past in the US, Germany, Japan, South Korea, and China.

Then, there's the 'digital first' focus in India. India stack is a massive digital infrastructure that's changing the game.

One can see it in the widespread use of UPI, the scale-up of ONDC, the success of FASTag, and the growth of fintech.

Trust me, we are just getting started. The government is also heavily investing in physical infrastructure, like roads and airports, and reducing TAT at ports.

It will make logistics smoother and help us become a major manufacturing hub.

So, our economy's caught in a snowball effect, and the benefits are piling up over time. It's exciting to see this unfold in our lifetime.

Equity markets are leading indicators of economic changes. So, while focusing on short-term gains of 10 -15 per cent might seem tempting, it's smarter to look at the big picture.

Identifying strong players and investing consistently can pay off in the long run. Seriously, don't miss this opportunity.

It's encouraging to see more retail investors catching on to this shift, with more demat accounts and SIP participation rising.

Share your views on the IT sector. When do you expect the sector to come out of the gloomy weather?

We are not expecting any big shake-ups compared to the last quarter.

Caution is still the name of the game, which means decision delays.

Furthermore, limited discretionary spending is adding to investor hesitancy.

Companies are focusing on consolidating suppliers and optimizing costs to maximize deal returns.

And when it comes to budgeting, we don't foresee any significant shifts happening anytime soon.

Now, why has the IT sector been performing so well lately? It’s because of the recent strong performance driven by optimism about the US market and anticipated growth improvements.

So, we suggest a bottom-up approach to stock selection in the IT sector rather than making sector-level decisions.

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What sectors are you positive about at this juncture?

People will loosen their purse strings for the good things rather than essentials as they make more money. 

This spells good news for businesses that cater to these “discretionary spending,” like restaurants, fashion brands, and entertainment options. 

The government's infrastructure push also creates exciting opportunities for companies that provide industrial consumables and capital goods, as they will likely see a boost. 

Regarding government priorities, railways, and defence are also getting special attention, making stocks in those areas worth watching. 

Finally, the government’s initiatives, such as the PLI and Aatmanirbhar Bharat, encourage domestic manufacturing, which has us bullish on the manufacturing sector. 

But we are not just looking at traditional players, we are positive on select new-age businesses as well.

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Disclaimer: The views and recommendations above are those of the experts, not of Mint. We advise investors to check with certified experts before making any investment decisions.