Jyoti Roy - DVP- Equity Strategist, Angel One Ltd, said that he is positive on the prospects for Samvat 2078 as he expects a 15.5% earnings CAGR between FY22-FY24, which justifies premium valuations and would continue to drive markets.  

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In an interview with Zeebiz's Kshitij Anand, Roy said that the big message for investors for Samvat 2078 will be to remain invested in the markets despite any short-term volatility due to tapering by the US Fed. Edited Excerpts:

Q) What is the big message that you want to give to your readers on this Diwali 2021 on markets, investing, wealth creation, or in general?

A) Samvat 2077 has been a great year for investors as the Nifty continued to hit record highs and even the second pandemic wave in Q1FY2022 did not have any meaningful impact on the market.

However, post the spectacular rally, investors need to moderate their return expectations from here on.

The big message for investors for Samvat 2078 will be to remain invested in the markets despite any short-term volatility due to tapering by the US Fed.

In the long run, returns are a function of the time spent in markets rather than a function of timing the markets. Hence, investors need to remain invested in the markets rather than try and trade the markets.

Q) What are your expectations from Samvat 2078?

A) We are positive on the prospects for Samvat 2078 as we expect a 15.5% earnings CAGR between FY22-FY24, which justifies premium valuations and will continue to drive markets.  

While we remain positive on the markets from a longer-term perspective the Nifty is currently trading at a P/E multiple of ~22.5x on rolling one-year consensus earnings, which is well above the past five-year average of 18.4x and is not cheap.

Therefore, we expect market returns for Samvat 2078 will be in line with earnings growth.

Q) Which sectors are likely to hog the limelight this Samvat 2078?

A) The Banking sector had been one of the worst impacted sectors due to the second Covid wave, which had led to another round of spike in NPAs and credit costs in Q1FY2022.

However, going by the initial trend in the Q2FY2022 results, it seems like the worst is over for the sector with larger banks reporting improvement in asset quality.

We expect a pick-up in the AUM growth, along with significant improvement in asset quality and a decline in credit costs in H2FY2022, that should lead to a rerating for the sector. We, therefore, expect the banking sector to do well and lead the markets from here on.

While we are positive about banking. We also believe that sectors like aviation, consumer durables, hotels, multiplexes, and real estate will also do well going ahead due to the reopening of the economy and pent-up demand.

We are also positive about CVs, cement, and building materials, given that they will be the biggest beneficiaries of the Government’s focus on infrastructure and housing.

We also believe that the IT sector will continue to do well going forward despite significant rerating over the past one year, given the structural upshift in the growth trajectory over the next 3-5 years.

Q) It has been crazy SAMVAT 2077 – your big lessons for investors?

A) Samvat 2077 has been an exciting journey for investors as the Nifty is up by ~40 per cent from the last Samvat’s level due to a strong rebound in the economy and even a devastating second Covid wave could not stop the recovery process.

So, one of the key learnings from Samvat 2077 is to remain invested in the markets from a long-term perspective and ignore short-term volatility.

Q) On the IPO front – many big tickets IPOs are lined up in SAMVAT 2078. How is the IPO activity likely to pan out by next Diwali? What are you advising your clients with respect to a flurry of IPOs hitting the D-Street?

A) The new Samvat has started with the Paytm IPO, which opened on 8th November 2021. Post that, investors will be looking forward to the LIC IPO, which will be the largest in the history of India.

Other than Zomato, Nykaa, Policybazaar, and Paytm, there are other new-age tech companies like Ola, Flipkart, Pharmeasy, Byjus, and SnapDeal, which have expressed their intentions of coming out with their IPOs in the near future.

We believe that the new-age tech companies will offer great investment opportunities for investors in Samvat 2078.

Q) Retail investors have become active when it comes to supporting the market or in IPOs. How do you see this change? Although we have only seen a rising tide, what if the tide reverses?

A) One of the key highlights post the second Covid wave has been the significant increase in direct retail participation, which is reflected in the increase in the Demat penetration from 3.1% in March 2020 to 5.1% in September 2021.

We believe that India has crossed an inflection point and expect the Demat penetration will continue to increase from here on as India is still significantly below countries like China, which has a Demat penetration of 13.7%.

Moreover, MF flows have also turned positive in the first half of FY2022 as it witnessed inflows of over Rs 53,000 crore as compared to outflows of Rs 39,300 crore in FY2021.  

Going forward, we expect mutual fund flows will remain robust, along with a continued increase in direct retail participation, and will more than makeup for any possible slowdown in FII flows due to tapering.
Therefore, we expect the tide to continue though there could be some short-term pullbacks.

Q) ETFs have also become a popular way of parking money. How do you see this as an investment product for Indian investors? It is popular in the US and other countries?

A) ETFs are a popular investment avenue overseas and it has been gaining traction in India.

We believe that ETFs, given their cost advantage over traditional actively managed funds will continue to gain traction in India and is a great investment vehicle for investors looking to generate returns in line with the markets.

Q) What would you suggest to investors for SAMVAT 2078 on Gold and investing overseas?

A) Gold as an asset class is a proven hedge against inflation in the long run and investors should have some amount of gold in their portfolio as part of the overall asset allocation.

Overseas investing is another avenue of diversification for investors and should be a part of the portfolio.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)