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    ETMarkets Fund Manager Talk: Valuation primary concern for India amid uncertain global arena: Abhishek Gupta, Edelweiss AMC

    Synopsis

    India’s economic outlook will continue to be stable in the context of the global uncertainty and recessionary fears. FY24 GDP growth can be ~6%, driven by a reduced inflationary impact on bottom of pyramid consumption, improving capex/infra spend and the second level of discretionary spending, led by the recent housing boom.

    Abhishek Gupta_ Edelweiss MF (1)ETMarkets.com
    At the fund level, we evaluate multiple sectors in relation to each other rather than looking at them in isolation. Consumption spending can be multifaceted across staples, discretionary, durable and services.
    Indian equities have outperformed most emerging markets in 2022, driven by strong domestic flows and benign economic environment relative to the rest of the world.

    But if global economies stumble upon a recession, India will not be unscathed, says Abhishek Gupta, fund manager - equities, Edelweiss Asset Management.

    “Although India has managed the inflationary environment better v/s peers so far, any late impact of increased interest rate on discretionary consumption, crowding out of investments, or global geopolitical led uncertainties are risk factors one can’t overlook,” Gupta told ETMarkets in an interview.
    Edited excerpts:

    How do you see 2023 panning out for Indian equities?
    India’s economic outlook will continue to be stable in the context of the global uncertainty and recessionary fears. FY24 GDP growth can be ~6%, driven by a reduced inflationary impact on bottom of pyramid consumption, improving capex/infra spend and the second level of discretionary spending, led by the recent housing boom.

    Domestic corporate earnings should grow in mid-teens for FY24, as input costs stabilize and businesses absorb the cost of higher debt.

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    Given that the rate hike cycle is seen peaking by the end of June, we expect a modest return at a broader market level by end of CY23. Valuations are marginally higher than the historical average, and this is capping the upside from multiple rerating.


    Which are the sectors you would be betting on in the run-up to the Union Budget and why?
    We prefer themes like domestic consumption (beneficiaries of falling commodity prices/inflation), and domestic capex/infrastructure-focussed businesses, backed by an accommodative policy stance.

    Therefore, we are overweight on the BFSI, cement, consumption and industrial capex sector. We have been maintaining a cautious stance on globally-backed sectors like metals, energy and technology due to uncertainties revolving around global growth.

    What are the major downside risks for Indian equities in 2023?
    Valuations are of primary concern. Indian indices have outperformed most emerging markets in 2022 driven by strong domestic flows and benign economic environment relative to the rest of the world.

    If global economies do stumble upon a recession, India will not be unscathed.

    Although India has managed the inflationary environment better v/s peers so far, any late impact of increased interest rate on discretionary consumption, crowding out of investments, or global geopolitical led uncertainties are other risk factors that one can’t overlook.


    Which were your major bets in 2022 and which sectors do you see investment opportunities in this year?
    We had turned positive on the domestic oriented sectors during early 2022 and that stance continued throughout the year for us. We saw early signs of credit offtake backed by capex and housing demand which made us take a positive stance on lenders/financial services. Automobile sector was another space where we increased exposure at both OEM and ancillary names.

    We believe with early signs of inflationary pressure abatement, some respite on margin pressures felt by industries can play out during 2023.

    This makes us positive on the bottom of the pyramid demand resumption (severely hit due to purchasing power impact). Also, we continue to hold a positive bias on themes like indigenization and industrial capex play.


    How have the funds that you are currently managing at Edelweiss performed in the last year?
    The calendar year 2022 was a year of heightened volatility in the backdrop of geo-political tension, an inflationary environment, and supply chain disruption.

    As a fund, we have always endeavored to give calibrated risk adjusted exposure to our investors and try to smoothen their experience in the equity market. These goals were satisfactorily met.


    What kind of asset allocation would you recommend an investor looking at putting Rs 10 lakh in the market today?
    Given that the Indian market, despite strong interest by retail investors in the recent past, is still hugely under penetrated as a percentage of financial savings, I would advise investors with a medium to high-risk exposure to maintain 60-80% equity allocation, and 10-20% in debt.

    Equity as an asset class over the medium term period (5 years plus) has proven to be the best asset class and we believe similar outperformance shall continue over the coming decades.


    In your “Edelweiss Large & MidCap Direct Plan-IDCW Payout” fund, the exposure to consumer staples is quite less. Would you look at increasing the same this year given that margins have bottomed out, and rural demand is also seen recovering?
    At the fund level, we evaluate multiple sectors in relation to each other rather than looking at them in isolation. Consumption spending can be multifaceted across staples, discretionary, durable and services.

    We have a bottom-up stock selection process where we try to maintain a minimum overlay of top down view and select names in the portfolio that meet our fair investment philosophy. As a proactive fund manager, we are always on the lookout for ideas that can meet our trinity selection criteria based on market cap, liquidity and upside potential.


    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)






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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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