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Time of India
9 hours ago
- Business
- Time of India
Midcaps, Smallcaps, and IT appear overheated as valuations stretch, says Ram Medury, Maxiom Wealth
After a sharp rally in Indian equities, concerns are mounting over stretched valuations in certain pockets of the market. In this edition of ETMarkets Smart Talk , Ram Medury , Founder and CEO of Maxiom Wealth , shares his cautious view on midcaps, smallcaps, and the IT sector, which he believes are beginning to look overheated. While the broader market outlook remains constructive for the second half of 2025, Medury advises investors to tread carefully in segments that have run up too fast, too soon. He also offers insights into sectoral opportunities, asset allocation post the RBI 's rate cut, and the impact of global geopolitical and trade risks on Indian equities. Edited Excerpts – Q) Thanks for taking the time out. June is turning out to be a volatile month for D-Street. How is 2H2025 likely to pan out for Indian markets? Do you think most of the negatives are behind us? by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Elegant New Scooters For Seniors In 2024: The Prices May Surprise You Mobility Scooter | Search Ads Learn More Undo A) We expect good rainfall in the upcoming monsoon period which may increase the earnings of 10-15% for agriculture-based stocks and also will help in reducing inflation at the base level. With the recent RBI rate cuts we assume a stable low inflation outlook but the global geopolitical scenario has changed quickly. As a large part of India's inflation is linked with crude oil we do have at least one negative ahead of us as oil price climbs. Overall, with increased spending on Infra by the government, the growth rate of the organised sector is expected to improve in H2. Live Events Q) What does a 50 bps cut mean for equity and bond markets? What should be an asset allocation strategy? A) A 50 bps rate cut by the RBI makes borrowing cheaper, boosting liquidity and supporting growth, which is positive for both equity and bond markets. In the current Indian scenario, rate-sensitive sectors like banks, autos, and real estate may see strong equity gains, while long-duration bonds are likely to rally as yields fall. Post the rate cut, Investors can consider increasing exposure to good quality stocks and on the fixed income side in Short duration/Accrual funds. A small allocation to gold can act as a hedge against potential inflation post recent geopolitical events. Q) What is your take on Q4 earnings from India Inc.? Any hits and misses which you tracked in the results? A) In the quarter ending Mar'25, YoY sales growth held steady near 9%, reflecting sustained business momentum. However, YoY PAT growth dropped to around 10% from nearly 17% in the previous quarter which can be counted as a 'miss'. Aggregate profit margins improved to 10%, returning to their recent peak. This would be a 'hit' as the trend continued for two consecutive quarters, indicating better operational efficiency in corporate India given the backdrop that both sales and profit growth receded from the prior quarter. Q) Nifty Bank hit a record high in June which suggests that there is a lot of interest in banking stocks. What is fuelling the rally in financials – is it the rate cut by RBI? A) The rate cut of RBI by 50 bps and CRR cut of 100 bps is expected to unlock 2.5 lakh crore for banks by Dec 25. This extra liquidity will help the banks in more disbursal and thereby improving their bottom-line and topline. The recent corrective measures by RBI to monitor MFI and unsecured lending as also result in lowering of distressed assets in big financial institutions which has also improved the overall health of banks' Balance Sheets. Q) Which sectors are likely to remain in limelight in the 2H2025? A) Banks and NBFCs would do well as a direct impact of the rate cut. The consumer durables sector is also expected to have a good run with increasing disposable income and increasing exports. With many of the consumer durables now working with MNCs to manufacture their products, there is room for growth in this sector. Defence is another sector that would do well given the geopolitical turbulence. Q) The tonality keeps changing from the US when it comes to 'Trade Talks'. Do you think it is still a relevant headwind for equity markets across the globe? A) The markets seem to be now shrugging off the initial apprehensions of tariff tantrums. US markets initially plunged after the new tariffs were announced in April 2025, with the S&P 500 falling nearly 15% at its lowest point. After a pause in tariff escalation and some policy walk-backs, markets rebounded, and the S&P 500 and Nasdaq are now modestly above where they started the year, while the Dow Jones remains slightly negative year-to-date. Despite the recovery, as of mid-June 2025, US markets have not fully regained their pre-tariff highs and remain volatile due to ongoing trade tensions and global uncertainties. Meanwhile, Indian markets have significantly outperformed US indices in the same period, reaching new highs and showing resilience despite global trade tensions and the US tariff shock. India has low trade exposure with the US if we consider direct import and export. But with the US tariff risk, comes global tariff risk which may impact the demand of Indian goods outside as competition intensifies. With the India US trade deal in talks and major new announcements coming up, we can expect India to be a beneficiary in few of the sectors like Auto Ancillaries and Electronics. Q) China equity markets are up in double digits while we have underperformed most EM peers. Does it make a case for global diversification? A) China's economy is growing at 5.4% but facing demographic and regulatory headwinds. While it holds strategic power in rare earths and currency innovation, export models are under strain. Its market remains undervalued, needing global trust to re-rate. Challenges loom, but scale and influence remain formidable on the world stage. Also, there is a lot of geopolitical tension all over the world, with three international borders on the boil, a lot of volatility is expected in all the major economies. Q) Which sector(s) is/are looking overheated and why? A) India's stock market rally has been broad-based, but concerns of overheating are rising in midcaps, smallcaps, IT and cyclical sectors like realty and metals. Valuations are appearing stretched, especially in mid and smallcaps, driven by strong retail inflows. IT is facing global demand and macroeconomic headwinds. The automobile sector, especially OEMs could be subdued this year, as the growth rate may be slower due to the high base last year. Despite gains, realty and metal sectors remain vulnerable to interest rate or commodity price shifts.
India Today
08-05-2025
- Business
- India Today
Why stock market investors shouldn't panic amid rising Indo-Pak tensions
Missile strikes and border escalations tend to send a chill down investors' spines. But in the case of the latest Indo-Pak flare-up, India's markets appear to be taking it in stride, and with good reason. While 'Operation Sindoor' led to worries about increased market volatility and losses, the main indices on Dalal Street actually managed to end in green in the previous session. Even today, the stock markets remained steady. The quick rebound of the markets after initial jitters, strong domestic inflows, and muted foreign outflows all point to a market that has matured well beyond knee-jerk panic. Ram Medury, Founder and CEO at Maxiom Wealth, was among analysts who said that 'Operation Sindoor' was focused and non-escalatory. 'The strikes were precise, targeting only terrorist infrastructure, and avoided Pakistani military facilities, signaling restraint and an intent to avoid a broader conflict,' Medury said. He noted that the Defence Ministry's framing of the operation as 'measured and non-escalatory' helped contain market nerves. BE CAUTIOUS, DON'T PANIC Looking ahead, he cautioned that investor sentiment hinges on Pakistan's response. 'Market sentiment remains stable for now, but if Pakistan's response escalates significantly, especially beyond symbolic retaliation, foreign institutional investors (FII) could turn cautious, particularly given the rupee's recent appreciation and global risk aversion. However, if Pakistan's reaction is limited to face-saving measures, markets are unlikely to see a significant correction,' he said. Medury also flagged India's non-military moves as a potent signal to investors. 'India has intensified non-military pressure, including a total trade ban, suspension of the Indus Waters Treaty, closure of airspace and ports to Pakistani traffic, and blocking digital channels, aiming to further weaken Pakistan's already fragile economy,' Medury said. 'India's economic exposure to Pakistan is negligible, and India's robust reserves and economic fundamentals provide stability, while Pakistan faces heightened risk of fiscal and external financing stress if tensions persist,' he added. He concluded that India would likely continue leveraging its economic strength: 'India is expected to continue using economic and diplomatic levers to isolate Pakistan, regardless of the military situation.' WHY INVESTORS DON'T NEED TO WORRY The bigger takeaway for investors, particularly Indian retail participants, is that this geopolitical storm hasn't spooked the markets, and for good reason. India's economy, which recently crossed the $4 trillion mark, has minimal direct trade with Pakistan. Citi analysts point out that past conflicts haven't shaken financial markets for long. After the 2019 Pulwama-Balakot episode, bond yields spiked just 15 basis points before settling. During the Galwan Valley clash with China in 2020, the rupee slipped 1% but quickly bounced back. Ajay Marwaha, head of fixed income at Nuvama Group, told Reuters, 'If there is a cessation of hostilities like there should be, pragmatically and practically, the investment climate may not actually be harmed.' Portfolio manager Sat Dhura of Janus Henderson Investors noted that local investors are emerging as a stabilising force. 'Strong domestic inflows could provide support to the market,' he said, even if foreign investors become skittish in the short term. 'The Indian market had begun to outperform on the back of the perception that there is some insulation from Trump tariffs given the strength of domestic consumption and a clear signal of monetary loosening from the central bank,' Dhura added. Radhika Rao, senior economist at DBS Bank, also agrees. 'While sentiments are likely to be jittery in the immediate term, these tensions are unlikely to derail the medium-term appeal of the Indian economy,' she said. She highlighted the recently concluded UK trade deal and ongoing US negotiations as key positives. 'The just-concluded UK deal, progress on a US trade agreement, and accommodative monetary policy would be more important factors in shaping investor outlook.' Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said investors should track Pakistan's response. 'Uncertainty regarding the extent of an expected face-saving response from Pakistan to India's Operation Sindoor will weigh on markets. From the market perspective, it is important that the conflict should not escalate,' Vijayakumar said. 'An escalation, apart from other fall-outs, will also impact India's fiscal consolidation drive. If the MPC is to continue with rate cuts, fiscal consolidation is important.' 'In the current context of uncertainty, investors may wait and watch the developments on the India-Pak tensions,' he added. (Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
