The current state of the markets
- In Q4 FY19, Sales and PAT for Nifty companies grew by 10% and 16%, respectively, largely aided by Financials.
- Excluding Corporate Banks, Nifty profit after tax (PAT) grew by ~2% YoY only and broader earnings growth for the market remains muted.
- At ~19.5x 1-Yr forward P/E multiple for the Nifty, valuations are at a premium to their long-term average.
- Valuations for the broader market still offer a good return for long-term investors.
- With the election-related uncertainty over and the incumbent government getting a strong mandate, we remain constructive on India’s overall economic growth going forward and suggest that investors may continue to build equity exposure for the long term.
- In this environment, funds in the multi-cap and large-and-midcap category could be favorable as they provide flexibility to move across market cap and sectors. Also, they will typically have a significant allocation to mid-and-small cap stocks, many of which we believe are still available at reasonably attractive valuations.
- Select themes that we may look to participate in are; Consumption (i.e. Consumer and Consumer Discretionary) and Financials (i.e. Private banks, Corporate Banks and select NBFCs), and Industrials (i.e. Capital Goods, Infrastructure, and Cement).