ETMarkets Smart Talk: Geojit’s Satish Menon on Gold, IPOs, and Samvat 2081 - What investors should expect?

“We anticipate the early phase of Samvat 2081 to be marked by volatility due to moderation in corporate earnings and contraction of India's premium valuation,” says Satish Menon, Executive Director, Geojit Financial Services.

In an interview with ETMarkets, Menon said: “The current market dynamics are favourable for gold, driven by a number of factors including rising geopolitical tensions, lower interest rates, sluggish global economic growth, and strong demand from central banks,” Edited excerpts:

It is turning out to be a volatile October, but it looks like Nifty has good support around 24500-25000 levels. What is your take on markets?

The market is currently in a consolidation phase due to muted domestic earnings and the shift of FIIs funds into other Emerging Markets.

The Nifty index is receiving interim support, though its continued stability will hinge on the full Q2 results and indications of a recovery in demand & profitability in the third/fourth quarters.

In the near to medium term, the market is expected to remain rangebound, with potential fluctuations capped at around ~ ±5%.

We saw the biggest IPO to hit D-Street this month. History suggests most of the big-ticket IPOs with issue size of more than Rs 10,000 cr have failed to deliver. What are your views?

We maintain a positive long-term perspective on Hyundai. The stock is fairly priced, limiting the upside in the short term affecting retail appetite.

However, it would be inaccurate to compare this IPO with larger ones from the past and the subsequent market consolidations, as the situation has greatly improved.

India, now is a $5 trillion stock market, and demand for domestic equity from both foreign and domestic investors has significantly increased.

What is your take on Gold? The yellow metal is trading near record highs, and we are approaching Dhanteras as well. Time to invest in physical or digital Gold?
The current market dynamics are favourable for gold, driven by a number of factors including rising geopolitical tensions, lower interest rates, sluggish global economic growth, and strong demand from central banks.

However, a strong US dollar may place short-term pressure on prices. Long-term investors are advised to continue investing in physical or digital gold, with opportunities to increase holdings during price dips.

What are your expectations for Samvat 2081? Any top picks you have on your radar?
We anticipate the early phase of Samvat 2081 to be marked by volatility due to moderation in corporate earnings and contraction of India's premium valuation.

However, after this initial period of consolidation, we expect the market to improve due to a reduction in interest rates and a cut in global inflation, which can boost future corporate earnings.

The impact of the consolidation is likely to be contained by strong domestic inflows, which should help absorb global market volatility. In this environment, we expect domestic demand-driven sectors, particularly consumption stocks, to outperform the broader market.

What about sectors – which sectors are looking bullish till the next Diwali?
We expect domestic oriented stocks to perform better amid a global slowdown. Promising sectors include consumption, FMCG, infrastructure, new-generation companies, manufacturing, and chemicals.

This outlook is based on expectations of a stable domestic economy, a projected reduction in domestic inflation, and the positive impact of the China Plus One strategy (PLI scheme) on business growth.

Additionally, we are optimistic about large private banks and NBFCs, which are currently trading below the long-term average valuation and expectation of an RBI rate cut in 2025.

Any sector which you recommend investors to pare their positions?
Sectors such as capital goods, real estate, IT, pharmaceuticals, and autos may face a higher risk of underperformance in the short to medium term.

These are in context to premium valuation, and the slowdown in the Global economy and domestic pent-up demand. Highly export-based stocks are also vulnerable in the short term.

Big ticket IT firms have declared their results for Q2. The BSE IT index has risen more than 20% in the last 6 months. What is the sense you are getting from the management commentary?
BSE IT Index has fared better due to Q2 results, which were marginally better than Q1 and due to a slight upgrade in margin outlook.

Management continues to project a positive view due to increasing AI-based deals and improvement in the BFSI segment, especially in the US. AI is expected to be a driver in the long term.

The BFSI segment is expected to improve in 2025 in anticipation of the Fed rate cut. IT sector valuations currently appear high, exceeding the long-term average, and earnings growth is low. At present, we hold a neutral view with a focus on selective stock picking.

We are getting Rs 24000 Cr SIP every month – a new record from retail investors. Can retail money save us if a global slowdown hits D-Street because earnings will take a hit which are already showing signs of slowdown?
Indeed, the substantial domestic inflows are mitigating the impact of FII selling, helping to moderate the downward momentum.

While FII net outflows have risen and may continue in the near future, DIIs are expected to remain robust buyers.

This trend is likely to sustain due to continuation of substantial inflows and a high level of cash and non-equity positions in MFs.

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