Edited fragments from a chat:
How do you currently position your portfolios in the midst of global headwinds with regard to rates and domestic ruckwind of GST, tariff reductions, etc.?
In the past 6-9 months we have strongly encouraged our customers to do two things- first: Switch away from central/small caps to large caps due to appreciation problems and second: focus on the domestic economy that are confronted with sectors such as BFSI, Infrastructure, Insurance, Capital Markets, etc. and are underweight and not. These have benefited our customers. In general, our bias continues to exist to the domestic economy for sectors. We also start to see opportunities in the room in the middle/small cap selectively.
Policy is increasingly aimed at supporting growth in the past 12 months with a reduction in income tax, reductions of rate and GST rationalization. These will stimulate every growth over a longer period. Pay Commission can be a big theme in Cy26.
SENSEX, Nifty has not been beating in the past year in the Bank FD. Do you think that the usually correction is behind us and that the growth process should soon be back?
Marktrendements will always be lumpy instead of linear. Periods of high efficiency will alternate with periods of moderate efficiency. Making the timing good for these periods is very difficult and usually not even worth trying. Investors trying to time these market cycles can miss large market trally and this will probably be more expensive in the long term.
Expensive valuations and low profit growth had been a theme in FY25 and we had repeatedly emphasized these worries. However, we currently see markets as reasonably appreciated and expect Nifty to rise by 10%. Towards the end of the tax year, a new high is very likely.
FII sales has created pressure on Indian shares. We saw the Q1 win season do little to change the opinion of investors. When do you think we can again expect a broad profit growth with double digits?
The monthly net purchases of Diis have exceeded RS. 60,000 CR in 6 of 8 months in Cy2025 (including MTD purchases from August van Rs. 76,000 CR). Buying Fii Sale is very high. We believe that the growth costs at an aggregated level will improve from here, because the profit of heavy weight sectors such as BFSI, IT and consumption are almost equipped on the soil and have to improve H2FY26. For the coverage universe of the institutional shares of HDFC Securities, the expected profit growth for FY26E and FY27E is 11.7% and 16.4%.
Which sectors do you think that the next stage will lead to market growth and what drives your conviction in it?
Our preferred sectors are large banks, car, consumer discretionary, real estate, cement and capital goods. Domestic Fundamentals remain quite strong and these sectors would continue to see strong profit growth. We remain underweight on oil and gas, mid-cap IT, small sofas and metals.
It seems that HNIs are very interested in newer assets such as Reit’s and invite to achieve high yields in a falling interest rate environment. Do you think that the revenues of 7-8% are sustainable in the long term of these two assets?
In general we are positive about both asset classes. High distribution yields of approximately 6% for REITs and 9-11% for inviting make a strong argument for allocation to these activa classes and offer downward protection to the total return. A further decrease in long -term bond returns will also support these activa classes.
Investors must take into account that unit prices of output and Reit’s have shown much higher volatility than the NAV of the units or distribution of cash flows. Investing have debt -like characteristics, but investors usually have momentum hunters. In Invits we recommend a contrary approach where they have to buy if the prices of unity fall considerably under the NAV, while the profit is booking when unity prices rise far above the NAVs.
In Reit’s, the total return will be in accordance with the outlook on commercial real estate. Currently, the absorption of office space will probably surpass the delivery in the next 2-3 years, which could stimulate the return for Reit’s.
If you currently had RS 10 Lakh to invest in the market, how would you spread it over gold/silver, shares and debts?
Assiva-allocation depends on the risk profile, the investment horizon etc. For a moderate risk profile investor, we recommend a 8-% allocation of 50% of debts. Gold and silver were focused in 2025 and there can be volatility in the short term. That is why we recommend that gold and silver should be at 5% of the portfolio, but this allocation can slowly increase to 10% in the next 2-3 years. For an aggressive investor, the allocation of shares can be 65-70%.
Finally, what is the only contrary idea that you would go back for the next 12 months?
Our preference remains for large cap stocks above mid/ small caps. Investors tend to agree with the hypothesis, but when the discussion switches to ideas at stock level, investors mainly want small caps. The bias is so strong that suggesting large caps feels like a contrary idea. Our analyst remains positive about the infrastructure and real estate sectors that can come back. Investors could also selectively bet on those small/ mid -cap ideas of high quality where valuations may have achieved attractive levels.
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