IIFL Finance CEO Optimistic About Indian Economy and Equities

IIFL Finance CEO Optimistic About Indian Economy and Equities

VoM News Desk | October 30, 2023 | 04:38 PM IST | Breaking News | Follow on Google News

Pranav Haridasan, MD & CEO of IIFL Finance, Shares His Views on Market and Economy

IIFL Finance CEO Optimistic About Indian Economy and Equities

Pranav Haridasan, MD & CEO of Axis Securities, is optimistic about the Indian economy’s growth trajectory, which he believes will positively impact Indian equities. He also highlights the improved corporate balance sheets and the robust health of the Indian banking system as driving factors for double-digit equity returns in the next two to three years, primarily led by double-digit earnings growth.

Q2 Earnings Performance

Haridasan views the Q2FY24 earnings season as being in line with expectations. Large-cap IT service companies faced challenges due to economic conditions in major economies. The December quarter is traditionally weak for IT companies due to the holiday season. FMCG demand remained steady in urban areas but was muted in rural markets. However, the sector is expected to recover gradually in the upcoming quarter, supported by government capital expenditure, the festive season, increased urban remittances, and moderation in inflation. Financial heavyweights maintained robust performance with stable asset quality, despite some margin pressure.

Short-Term Market Outlook

Short-term headwinds include the rising US 10-year yield, geopolitical tensions, and potential increases in crude oil prices. The upcoming primary state elections and the general election next year are expected to increase market volatility. Nonetheless, the Indian economy remains in a favorable growth position, which is expected to be the primary driver of Indian equities. Improved corporate balance sheets and the healthier Indian banking system are additional factors supporting the expectation of double-digit returns in the next two to three years.

Mid and Small-Cap Strategy

The broader market outperformed the benchmark index over the past year. However, with midcaps and small-caps nearing overbought levels, some time correction is expected in the near term, while flows may shift towards large-cap stocks. Long-term prospects for the overall market remain attractive, with the potential for ‘growth at a reasonable price’ investments.

US Fed Rate Hike Expectations

Haridasan anticipates one potential rate hike in the upcoming Federal Open Market Committee (FOMC) meeting. The strong US economy may keep US 10-year bond yields elevated for an extended period, possibly until the second half of 2024 (H2CY24) when a softer bond view may emerge.

Impact of US Economic Slowdown on Indian Market

A US economic slowdown could impact export-oriented growth in the Indian market, posing challenges to earnings and market multiples. However, the Indian economy’s growth prospects and corporate balance sheet strength position it as a stable and attractive investment in a volatile global economy.

Foreign Investors and Indian Equities

While foreign investors have been selling Indian equities recently, Haridasan believes this trend is tactical and expects it to stabilize. Any cooling-off in US bond yields and the dollar index is seen as a positive sign for emerging market flows. India’s domestic market potential and its favorable economic outlook make it an attractive destination for foreign portfolio investors.

Positive Sectors for the Future

Sectors linked to the major economy, including financialization, digitization, import substitution, premiumization, and manufacturing, are expected to drive the next leg of the market rally. Key sectors set to benefit include BFSI, building materials, industrials and capital goods, hospitals, and automobiles.

Disclaimer: The opinions and suggestions provided in this article are those of individual analysts and do not reflect the viewpoints of VoM News. We encourage investors to consult with certified experts before making any investment choices.

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VoM News Desk

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