Mirae Asset Mutual Funds presents a cautious outlook
MUMBAI, Jan 15 (The CONNECT) – The stock markets need to watch out for rate trajectory by the central banks, US policies post new administration, oil price trend, geopolitical issues, revival in consumption, apart from the upcoming Union Budget, says Mirae Asset Mutual Funds
In its Monthly Equity Market Insight Report, Mirae says the Q2 slowdown is fairly priced.
Looking at the prospective trends, (especially three months of activity since Sept,2024), we see a prospect of a good comeback, it says.
Agriculture is likely to see a further revival as kharif crop and price outlook is favourable. Upcoming rabi crop is also likely to be positive. Government capex which has been lagging in 1HFY25, is likely to pick up in 2HFY25.
Rural consumption could offset the softness in urban consumption and this too presents a positive picture with the ongoing harvest and commencement of the next season.
“We also expect state government’s welfare spends will support consumption recovery,” Mirae says.
1HFY25 consumption was also impacted due to adverse weather (heatwave and flooding) and lower wedding dates. Both weather and weddings have normalised in 2HFY25 which is driving recovery in footfalls.
Monetary policy stimulus could also help in reviving growth in the near-medium term.
India’s long-term story intact: While near term concerns have risen and could weigh on investor sentiments, medium to long term India story remains intact driven by the following:
- India’s macros remain robust (Fiscal consolidation, Strong Balance Sheets, Recovery in Consumption etc) amidst slowing global growth. India’s long-term growth prospects steady, projected at 6.5% real GDP growth and 10-11% nominal GDP growth.
- Strong Balance Sheets: The strength of bank (NPAs- non performing assets below 1%) and corporate balance sheets is notable. India Inc.’s profits are growing strong, but they are also generating large amounts of free cashflows in sharp contrast to 2003-2008, where free cashflows were in deficit. Household debt levels are also reasonable compared to global standards. India’s aggregate debt to GDP is lower than in 2010, while it has risen globally.
- Key things to watch out are
(a) Rate trajectory by the central banks,
(b) US Policies post new administration
(c) Oil price trend,
(d) Geopolitical issues and
(e) Revival in consumption
(f) Upcoming Union Budget.
- Valuation and view:The Nifty 50 Index’s valuation at ~19x FY26E and ~17x FY27E P/E is reasonable given the consensus earnings growth of mid-teens CAGR over FY23-FY27. Earnings growth is broad-based, providing better certainty. Some sectors particularly amongst industrials continue to trade at a premium. Mean reversion is expected in these richly valued sectors.
