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1. Election heavy 2024, advantage India: Large part of the global economies will undergo elections in 2024 including India. However for India, likely continuity of incumbent will ensure continuation of supportive policy actions. For India, all the three elements of the capex cycle (Housing, Corporate Capex & Govt Capex) are now firing and hence the potential global slowdown should have limited impact on India. Over the medium term, we continue to remain constructive on equities and believe India is on the cusp of achieving robust growth over the next few years.
2. Corporate earnings continue to remain strong: Nifty earnings have risen at a 21% CAGR over FY20-24E, matching pace with the Nifty 50 index rising by 77% during the past 4 years. Earnings outlook is still robust for FY25/CY24 as rising corporate spending and strong bank balance sheets anchor earnings growth in mid-teen over the medium term. Compared with the other Emerging markets/major economies, India has shown more robust and consistent earnings performance. Visibility of India's cyclical upturn, full-blown capex cycle, robust demand and expected interest rate easing in 2HCY24 gives confidence in Indian companies to deliver healthy earnings growth next year.
3. Key things to watch out are: (a) News flow on Indian elections, (b) Oil price trend, (c) rate trajectory by the central banks and (c) Russia-Ukraine & Middle-East war impact on global supply chain.
4. Valuation and view: Mid/small cap indices have outperformed the Nifty 50 by 30-50% in last 1 year and could be due to strong flows in funds focused on mid/small caps (at a cyclical high). On the other hand large cap stocks have seen outflows (flows are at a cyclical low). As a result, Mid/Small cap stocks are trading at a significant premium to large cap. Nifty 50 is at reasonable valuation of ~20x on FY25 earnings with good earnings growth outlook. In this context, currently large cap focused funds appear well placed.
5. Recommendation: Investors should invest based on their risk profile and continue allocating via SIPs. We prefer large-cap oriented funds and hence any fresh allocations can be made in diversified funds like large cap, Flexicap and Multicap. Hybrid funds, given their flexibility in asset allocation can also be made part of core portfolio. In thematic funds, financial sector is trading at attractive valuations and hence can invest in Banking, Financial Services and Insurance (BFSI) fund.

If you have any further query or wants to connect with Mr. Gaurav Misra, Head-Equity at Mirae Asset Managers (India) Ptv Ltd, we would be happy to facilitate a call or email responses for your query.

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