Lumpy valuations and slower EPS growth could cap market upside: Viraj Gandhi of SAMCO MF
Markets may not be headed for a runaway rally just yet, says
Viraj Gandhi
, CEO of
SAMCO Mutual Fund
. With stretched
valuations
and moderated earnings growth, equities could remain range-bound in the near term. A sustained bull run, he warns, will need stronger fundamentals, supportive macros and a reset in valuations.
Edited excerpts from a chat:
Markets are dancing near lifetime highs. How much of this is driven by fundamentals and how much by FOMO?
Equity markets have observed a sharp rally due to the resolution of the Trump tariff issue. The current sharp rise in the markets is a function of extreme pessimism due to anticipated implications of
tariff war
. However, the looming issues such as geopolitical tensions and economic slowdown globally still persist. Thus, one needs to gauge the scenario with equanimity to make informed decisions.
What's your reading of retail investor behaviour right now? Have most of them learnt lessons after playing with fire by chasing SME and momentum-heavy smallcaps?
The Post COVID boom in the equity markets has led to the emergence of heightened activity in SME and small-cap stocks especially due to the entrance of a new set of investors. These new breed of investors now active in the markets, haven't seen a bear market cycle like the 2008. And the extremism of that market isn't the same as the correction in the markets that we have witnessed since the past few months. There is a likelihood that this new age category of investors could face the brunt of being invested in the wrong stocks at the wrong time. But when that will happen is anybody's guess. As far as momentum led stocks are concerned, if done under the guidance of robust systems, discipline and risk management mechanisms, generate good risk adjusted returns in the long term. A number of active and passive fund managers have time tested strategies in place to guide a retail investor especially during turbulent times.
Live Events
Operation Sindoor has also worked like an international defence expo showcasing the might of Indian defence companies. This is also reflected in the dramatic movement in share prices. How strong is the defence story on Dalal Street?
The defence sector would continue to gain strength due to the focus of the government on indigenisation and strengthening of India's defence system. The sector would observe continued focus by the government due to its national importance. In terms of allocation of the sector to the portfolio, one must align the capital with players that exhibit strong manufacturing and research capabilities to ensure sustained growth and profitability in the longer run.
With valuations stretched in certain pockets of the market, do you think the Q4 earnings season was strong enough to justify the rally that we are seeing?
The last quarter of the financial year was marked by a mixed earnings show with certain parts of the markets exhibiting extremely strong growth while the other exhibited a relatively slower earnings growth profile. However, the rise in the equity markets in the near term was a function of two factors - an overall steady earnings growth and the reversal of extreme pessimism built into the prices due to the Tariff War.
As an investor today, would you back consumption, capex, or financials in FY26?
The Indian
equity market
provides wide range of opportunities present across different sectors. There are several opportunities available across themes listed above, however one needs to be selective in terms of valuations, growth and the part of the value chain in which the company operates in a sector. As far as backing a particular theme is concerned, we are bullish on financials and consumption as a theme to pick up pace if everything in the economy falls in place.
Given current earnings momentum, macro tailwinds, and political stability bets, is Nifty 30,000 a realistic target by end of FY26?
A 30,000 kind of a number with the geopolitical issues out there and India's issues with its neighbours seem to be a tough mark to reach by the end of FY26. The current scenario points towards a moderated
EPS growth
and given the valuations are still lumpy, markets could see some more time correction. Once the fundamentals, macros and valuations are aligned only then can we witness another outsized bull run. Until then it could be more of a range bound move till the previous highs.
Investors have been caught between two battlefronts lately — the global trade tariff war and the near war-like tensions between India and Pakistan. Now that both seem to be easing, what are the key takeaways for investors from this double dose of geopolitical anxiety?
The key takeaway for investors would be to ensure there is an effective hedging mechanism in place to protect the downside risk of their portfolio. During times of turbulence and uncertainty, downside protection discipline ensures lower volatility and better investor experience.
ETMarkets WhatsApp channel
)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
13 minutes ago
- Time of India
F1 visa updates: Will US soon lift restrictions on student visas as Trump goes soft on China?
Restrictions on international student visas could be lifted soon. As President Donald Trump has softened his stance on Chinese students and said Wednesday that Chinese students would be welcome in US colleges and universities, it is anticipated that the temporary restriction on international student visa applications would be lifted soon. In the US-China trade deal, the Trump administration has agreed to accept Chinese students, as Trump announced on Truth Social: "We will provide to China what was agreed to, including Chinese students using our colleges and universities." Trump also announced that he had always been in favor of admitting foreign students to the US as that helps US schools and universities as well. "We have 500,000 students coming in from China," Trump said. Pause on all visa interviews for social media vetting All US embassies and consular sections were asked to pause all visa interviews for the time being by Secretary of State Marco Rubio. The reason cited was a preparation for an extensive social media vetting. "Effective immediately, in preparation for an expansion of required social media screening and vetting, consular sections should not add any additional students of exchange visitor (F, M and J) visa appointment capacity until further guidance is issued septel (separate telegram), which we anticipate in the coming days," the cable said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Memperdagangkan CFD Emas dengan salah satu spread terendah? IC Markets Mendaftar Undo Earlier this week, State Department spokesperson Tammy Bruce suggested that the process would open up soon and students should continue to apply. "People should watch for those spaces to be open, should continue to apply. This is not going to be a lengthy or an ongoing dynamic," Bruce told reporters. "It was meant for a specific, almost an administrative adjustment." She said the interview pause was to ensure embassies and consulates knew what to expect in terms of additional vetting. "And that process, we were told, would be rapid," Bruce said.
Time of India
17 minutes ago
- Time of India
Mid-air escape: Air India London-Delhi flight entered Iran airspace as Israel struck with missiles; rerouted over Iraq
NEW DELHI: An Air India flight from London to New Delhi had just entered Iranian airspace when Israel launched a wave of missile strikes on Iran's military and nuclear sites. The flight was rerouted over Iraq before arriving in India one hour late, according to an AFP report. Tired of too many ads? go ad free now The close call was one of several disruptions on Friday as Air India diverted or turned back at least 16 international flights mid-air due to the sudden escalation and subsequent closure of Iranian airspace. Among those affected were services between India and cities like London, Toronto, and New York. Aircraft tracking site Flight Aware showed that two other Air India flights — from Delhi to Vienna and Mumbai to London — were nearing Iranian airspace and turned back to their origin airports shortly after the strikes began. In a statement, Air India said: 'Due to the emerging situation in Iran, the subsequent closure of its airspace and in view of the safety of our passengers, the following Air India flights are either being diverted or returning to their origin. We regret the inconvenience caused to our passengers due to this unforeseen disruption and are making every effort to minimise it.' The airline is offering full refunds or complimentary rescheduling to affected passengers and is arranging accommodation where necessary. The Indian Embassy in Iran also issued an advisory urging Indian nationals and people of Indian origin to stay alert and avoid non-essential travel, as tensions surged following Israel's precision strikes targeting Iranian defence infrastructure. Iran, Israel, Iraq, Jordan, and Syria temporarily shut down their airspace, leading to widespread cancellations and rerouting of global flights to and from the Middle East. Global airlines suspended flights to Tel Aviv and Tehran as air traffic over the region thinned out overnight. Israel said the strikes were a direct response to the growing threat from Iran's missile and nuclear capabilities. Iran retaliated by launching a wave of drones toward Israeli territory.
Mint
17 minutes ago
- Mint
India concerned about crude oil supply disruptions in Strait of Hormuz as prices surge after Israel's attacks on Iran
New Delhi: Indian policymakers are concerned about likely crude oil supply disruptions in the Strait of Hormuz – a key supply route for West Asian oil for the world's third-largest buyer – but are prepared for any eventuality after Israel's latest attacks on Iran sent oil prices surging to a two-month high, two people with knowledge of the developments said. India is particularly at a disadvantage given that it imports almost 90% of its energy requirements, of which half comes from West Asian countries including Saudi Arabia, Iraq, Kuwait and the UAE. Brent prices surged over 10% overnight and traded at about $74 per barrel, higher by 7.6% from its previous close, and way above $60 per barrel in May. Israel launched airstrikes on Iran on Friday, targeting the country's nuclear infrastructure. The Israel Defense Forces said the coordinated strikes hit multiple locations across Iran, marking the most serious attack on the country since the Iran-Iraq war in the 1980s. Also Read | Trump Sees Possible 'Massive Conflict' Between Israel, Iran Experts suggested that if the conflict continues and Iran blocks the Strait of Hormuz, which also has the loading ports of Saudi Arabia and the UAE, it may destabilize crude oil and natural gas trade. The narrow shipping passage accounts for about 20% of global crude oil supplies and 25% of liquefied natural gas trade. "This is a major event and may cause disruption if the situation continues. The Centre is closely watching the situation and is prepared for any eventuality in terms of supplies to India and availability of energy in the country," one of the two people said. An industry executive said on condition of anonymity that apart from the disruption of oil supplies in the Strait of Hormuz, the situation is likely to lead to higher freight and insurance rates, which will increase the landed cost of oil. Supply risk "About 20% of oil trade comes from that strait," said Prashant Vashisht, vice president with ICRA. 'Iran has threatened strikes on oil assets in Saudi Arabia and the UAE, Kuwait, and Qatar – there is potential supply risk. Further, Iran has threatened strike on in assets in other oil producers in the region, there is potential supply risk. Further, there is no alternate loading points for crude and gas which are generally loaded in that area. Only about 8% of the energy supplies coming through the strait can be diverted to other routes." "Currently, it is a wait-and-watch situation for the government and oil marketing companies. It also needs to be seen how the situation evolves in the next few days and how prolonged this conflict is," the second person said. An executive with an oil marketing company said there has been no immediate impact on supplies. However, there are concerns over supplies, going forward. "For June, the cargoes are already booked. But the issue would come up in terms of insurance and freight rate, which will impact the eventual prices," the executive said. Also Read | Israel-Iran conflict: Crude oil prices jump over 13%; Brent crude oil above $73 per barrel If prices remain high and continue to surge, the margins of oil marketing companies are likely to take a hit. Every $1 increase in crude prices would result in an increase of 50-60 paise per litre in petroleum product prices. However, no immediate impact on retail prices is expected because oil companies have been posting a profit on the sale of products of late due to low oil prices, said industry stakeholders. "At around $65 per barrel, oil companies were witnessing a healthy differential over pre-tax domestic and international prices of about ₹12 per litre of petrol and ₹9 per litre of diesel, this may now shrink," said Vashisht of ICRA. Economic impact JPMorgan predicted that oil prices may surge to $120 per barrel due to the conflict, which may lead to a 1.7% increase in retail inflation in the US. In the case of India too, there will be an economic impact, largely in terms of depreciation of the rupee against the dollar and on the balance of trade. "If prices reach the projected level of $120 per barrel in the near term, it will have created pressure on the forex front and the balance of trade as the import bill rises. However, an impact on inflation is not expected as retail fuel prices are not likely to be immediately increased as they have been kept stagnant even when prices were low," said Madan Sabnavis, chief economist of Bank of Baroda. Crude oil comprises about 20% of India's total import bill. India's crude oil import bill increased 2.7% to $137 billion in FY25, according to data from the Petroleum Planning and Analysis Cell. State-run oil marketing companies – Indian Oil, Bharat Petroleum and Hindustan Petroleum – have kept petrol and diesel prices unchanged since the ₹2 cut in March ahead of the elections last year. Queries mailed to the ministry of petroleum and natural gas, the finance ministry, Indian Oil, Bharat Petroleum and Hindustan Petroleum remained unanswered till publishing time. Navneet Damani, group senior VP and head of commodities research at Motilal Oswal Financial Services Ltd, said if Iran retaliates, prices would skyrocket and the worry is that the situation could escalate into a full-blown regional crisis, which would have significant implications for global oil supplies. Volatile situation "In a worst-case scenario, the Strait of Hormuz could be shut down, putting 20 million barrels per day of supply at risk. Prices have already jumped 10%, and any further escalation could push them up another 8-9%. It's a volatile situation, and everyone is holding their breath to see what happens next," Damani said. Also Read | Israel's war on Iran to hit Indian workforce A similar conflict between the two countries in October last year led to a sudden surge in prices. However, as the situation eased, so did prices. Stakeholders are now looking at how the situation evolves and how long this conflict stretches. Nikhil Dhaka, vice president at Primus Partners, said that although supplies are likely to be impacted, India's crude oil import basket is diversified with oil procured from Russia, the US and West Africa. OMCs have various options to source oil, going forward, although shipping costs of various routes need to be assessed. 'A prolonged impact on supplies through the Strait of Hormuz can significantly impact supplies globally, including India. For India, two-thirds of its oil and almost 50% of LNG flows through this route," he said. In February and March 2022, as Russia invaded Ukraine, oil prices surged to multi-year highs of $130 per barrel, which led India to release oil from its strategic reserves to meet demand. India also increased purchases from Russia starting in 2022 as it offered deep discounts amid sanctions by the European Union and the US.
