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Time of India
09-05-2025
- Business
- Time of India
No froth in market; largecaps may offer short-term value: Manish Gunwani
(You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel , Head-Equity,, says equity markets , with a 6% real return over the past decade, don't currently signal bubble concerns. While large caps may offer short-term value, focusing on themes and bottom-up investing presents sufficient risk-reward. Anticipated foreign capital inflow into India over three to five years, influenced by dollar trends, should sustain market is a feeling that markets are frothy, but that is probably because of mid and smallcap performance over the last three years. Objectively, if you see long-term data, the best correlation of market levels is not to GDP growth but to inflation. The 10-year real return on Nifty 500 is about 6%, which is where it should be theoretically because empirically, every market tends to converge at about 5-7% real return in equities when you see very long-term this does not work on a one- or two-year kind of time frame. I do not think this is a market to be excessively worried about. There is a bit of narrative about this being a bubble. I do not know, means the data does not seem to suggest that in 10 years, the equity markets have returned about 6% real return, it is not typically a level at which you should worry too much about market level. Now, you could say largecaps are cheaper and all that, yes, from a one-year perspective that may work. But it is a market where if we focus on just themes and bottom-up investing, there is enough risk-reward I said, ultimately you are part of the world. Now, if you have a country where your biggest import, energy, is structurally looking weak in terms of prices because of EVs and renewables and if you have a country where the biggest export which is services seem to be very resilient. So, even when listed IT services companies have slowed down, if you see our net services export has held up remarkably well, if someone is looking at long-term asset allocation globally, it is difficult to believe that you can be negative on Indian rupee or Indian assets, that does not mean every three months we will see positive foreign if you take a three-five-year view, I would think that foreign capital should come meaningfully into India. Maybe fixed income and FDI are more attractive because we tend to be expensive on listed equities, but we will not see any big outflows in the sense that yes, we saw outflows but ultimately if the market is attractive, foreign inflows will be healthy and the near-term, not everything but a big factor is the dollar. If the dollar index went from 110 to 99, I do not think it is very surprising to see foreign flows turning positive.
Time of India
08-05-2025
- Business
- Time of India
What sectors to be overweight on, underweight on, and completely avoid right now? Manish Gunwani answers
Live Events You Might Also Like: Buy the dips in quality names with earnings visibility: Hemang Jani You Might Also Like: What are Specialised Investment Funds and how will they impact investors? (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel , Head-Equity,, says despite expensive domestic-facing stocks , India's strong macroeconomics and the ' China plus one' theme offer opportunities, particularly in manufacturing exports to Europe and China. Despite a generally cautious outlook, beaten-down financials in India, trading below book value, present an attractive risk-reward opportunity due to the country's strong macroeconomics. While a deep US recession poses a threat to asset quality, the sector offers compensation for that risk. Elsewhere, auto and capital goods appear of good things have happened for India in the sense that the dollar has weakened, crude has fallen, RBI has become fairly dovish. I do not expect earnings to be anything great over the next two-three quarters, but there is the strength of the macro in terms of the currency, the current account deficit, inflation, interest rate trajectory, and also the geopolitical I do think that a lot of things that the US is trying to do are good for India. Now, it may be a very rocky path to get there, but what does the US want? They want to reduce China's current account deficit which could mean manufacturing moving out of China. They want lower energy prices and lower bond yields. Although they may not explicitly say this, they probably want a weaker dollar. So, all this is what India also wants. So, the macro narrative will support the is a fair thing to say that the US will definitely slow down. The extent of that slowdown is very difficult to gauge. It could be right from a mild slowdown to a deep recession, no one can predict that. So, it is not a market where you need to be very greedy. But the chances of macro narrative overpowering quarterly numbers is quite high.I do not think that at the overall headline index level, we will make big returns. But it is all about being nimble and catching the themes that can potentially work in the medium term. There are a fair amount of interesting themes which can work. Nothing is definite. For example, there is this tech platform segment, there is the shift of manufacturing from China segment, there is this beaten down financials segment. Personally, these kinds of themes look attractive from a risk-reward perspective.I am not very positive on global growth or as a corollary even on India growth from a one-year perspective in the sense that there is a range of probability outcome but there is a decent probability that there will be a severe slowdown globally. So, I do not think you can have a very cyclical portfolio at this point of time. Just following up from what you said, the risk-reward in buying anything related to the US economy is not you think about business cycles in three parts – US, India, and the rest of the world – which is Europe and China, the expectations are least from Europe, and China-related stocks and maybe there are some contrarian bets on that cycle which is metals and global auto which are worth owning purely because expectations are beaten has the best macro, but Indian domestic-facing stocks tend to be expensive, but there may be the theme of 'China plus one' expanding from the traditional chemicals to a lot of new segments may work. But yes, anything to do with the US economy is a bit risky, I would I meant was anything which is very cyclical and linked to the US economy is probably risky. But stocks linked with general global exports to Europe and China are quite cheap. They have done nothing for two-three years at least and that part is worth a bet. But I do not think you can be very aggressive because if the US slows down more than we think, then even Europe, China cannot do well, and even India will not do as well as we I said, it is not probably a time to be very cyclical, but I would say that any good manufacturing exporter from India – if the valuations look reasonable – are worth a bet because we do not know. All we know is that it is a once in a generation supply chain shift that will happen. You can be fairly certain that China's current account will go down and it will go down as a mix of exports coming down and imports going up. But safe to say that China's share in manufacturing will go who benefits, which category benefits, which country benefits is not exactly clear at this point of time, but as a theme, that is worth looking at. On the domestic side, it is a bit of a consensus view, but the only risk-reward space that looks attractive is financials which are below book or one-time book because India's macro is good. Hopefully, the asset quality will not deteriorate unless the US goes into a very deep recession that risk remains, but at least you are getting paid to take that risk. Auto, and capital goods look expensive to me. So, yes, on the domestic side, beaten down financials is the only really attractive cyclical sector.
