Exclusive Insights : ASK PW`s January 2025 Investment Policy Report
IPC: Moderating Expectations
The Trifecta
* Performance: Equity market has weakened
* Earnings: Estimates being cut, asking rates still higher
* Valuations: High despite market correction
* Valuations and Future Returns inversely related
* Return dispersion increases when valuations are high
* Flows: FIIs counterbalanced by domestic so far
* Flows: Huge supply absorbing higher domestic flows
* Nifty fair value estimates have little margin of error
* SMID: The earnings-valuation gap is more for SMIDs
* India: Deficit goal and welfare constraining capex
US Trump Effect
* The Trump Trade: What happened?
* Trump effect: Tariffs are not a one-way street
* Some complication in the rate cut picture
* Impact on India unclear at this moment
* US and global opportunities
Other Assets
* Long bond stays relevant despite Fed pivot
* Prefer InvIT’s over REIT’s
* Gold – to shine on rate cuts, demand and geopolitics too
Strategy and Model Portfolio
* Stay Neutral on Equity; Overweight Domestic
* Fixed Income – Stay Neutral
* Strategy: Stay Neutral on Hybrid (REITs/ InvITs) and Commodities (Gold)
* Model portfolio: Construct and Stance
* ASK PW Scheme Performance
IPC: Staying Neutral
A. Equity – Stay Neutral:
* Equity performance has dipped during recent quarters corresponding with the slowdown across many sectors including housing, consumption, industry, investment and government.
* The Trifecta of earnings, valuation and flows have turned to moderate expectation of return in the coming period. EPS growth is now expected to be less than half of average while valuations stay high despite recent corrections while FIIs outflows are being balanced by domestic flows.
* Policy swings in US and China measures are key global variables to watch out for.
* We stay neutral on equity with overweight position on Domestic and Large cap segment.
B. Fixed Income – Stay Neutral:
* RBI raised rates by 250 bps and paused; inflation easing broadly despite periodic hardening.
* Liquidity deficit have reemerged following RBI forex operations and need to be countered further
* US FED has taken decisive steps with 100 bps cut while expectation tampered for future cuts.
* India rate cut yet to start, continue our long bond strategy within overall neutral for fixed income.
C. REITs/InvITs – Stay Neutral:
* High interest rates and overhang of SEZ policy adversely affected the sector. However, IT sector ending WFH and GCC relocation have improved occupancy. Prices too have run up.
* We maintain neutral stance of the hybrid space while staying more positive on the InvITs sector.
D. Gold – Stay Neutral:
* Gold has enjoyed a stellar run in recent times on the back of buying from Central Banks and China and India consumers. The medium term outlook remains positive.
Performance: Equity market has weakened
Earnings: Estimates being cut, asking rates still higher
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