Expert Speak: Samvat 2081 has potential overall, but volatility to persist in stock market, says Aamar Deo Singh

Share market today: In a recent conversation with Mint, Aamar Deo Singh, Senior Vice President of Research at Angel One Ltd, emphasized that Samvat 2081 holds promise overall, yet volatility will persist due to the current state of the global economy and geopolitical tensions. Significant market swings, which offer both opportunities and challenges, will necessitate that investors remain alert.

Additionally, Singh highlighted several stocks that investors might consider for their portfolios, and he extensively discussed the upcoming US presidential election in 2024, the pricing trends of gold and silver, the behaviour of Foreign Institutional Investors (FIIs), and the current state of the IPO market.

Edited excerpts:

What are your predictions for Samvat 2081? Do you have any favourite stocks that you are considering?

Samvat 2081 has potential overall, but volatility is here to stay given the state of the world economy and geopolitical unrest. Extreme market fluctuations, which provide both possibilities and difficulties, will require investors to maintain vigilance. With Nifty 50 PE selling at about 20x its 1-year ahead EPS, which is marginally higher than the 5-year average of 19.4x, Nifty profits growth is probably going to stay at a +15% CAGR for the next several years. Given the long-term optimistic forecast for the India Growth Story, we think values are fair. Over the last 20 years, Nifty 50 has produced double-digit returns overall, and the future appears to be just as bright.

Few stocks that can be looked at investing this Diwali include Nippon Life, Mahanagar Gas, Persistent Systems, Neuland Labs, Torrent Power and Blue Star, from a long-term perspective.

Which sectors seem promising until the next Diwali? Is there any sector you would suggest investors to reduce their exposure in?

With real GDP growth rates of 8.2% in FY24 and 6.7% in Q1 FY25, respectively, India remained the largest economy with the fastest rate of growth in the world. The government’s push on capital expenditures, rising disposable income, consumer confidence, private sector investment recovery, and a prolonged recovery in discretionary spending are all contributing to the growth momentum. It is anticipated that GDP growth will continue due to strong demand and optimistic corporate sentiments. Capital goods, construction, consumer durables, finance, FMCG, gas distribution, information technology, pharmaceuticals, plastics, power, and refractories are all industries in which we have optimism. Overall investors should stay away from stocks where there are any signs of corporate governance issues.

What impact will the US election 2024 have on Indian investors, and which factors should be closely monitored over the next two months?

Four to five key elements are most likely to be very important in determining the direction of the market, which will therefore have a big effect on investor portfolios. First, both domestic and international markets will be significantly impacted by the results of the US presidential election. In addition, the US Federal Reserve’s position on rate cuts and the RBI’s strategy for controlling inflation and interest rate cuts are triggers that the markets will closely monitor. Last but not least, corporate profits and geopolitical tensions are also significant elements that should not be disregarded because they have the potential to be spoilers.

Due to geopolitical uncertainties, gold and silver prices are hovering near all-time highs. Is this upward trajectory likely to persist, and what lies ahead for precious metals?

Gold prices continue to hit record highs with gold gaining almost 25% YTD in Rupee terms. Internationally, gold is trading around the $2800 per troy ounce mark, up 35% YTD in dollar terms. Silver is currently still far away from its all-time high of $50 per troy ounce, witnessed in April 2011, but still in dollar terms its up 42% YTD. Overall US rate cut and expected further rate cuts leads to a weakness in the Dollar, which is positive for Gold & Silver, this has helped fuelled the rally. Further, geo-political tensions, diversification into commodities as an asset class, renewed buying interest by central banks and ETFs, have all added to the rally. Overall, Gold & Silver should be part of any investor’s portfolio, the quantum can vary anywhere between 8%-12% depending on their risk appetite. Overall, the momentum is there to stay, and corrections should be used as buying opportunities or adding onto existing positions, with a long-term perspective in mind.

The Indian stock market is experiencing outflows of foreign capital as investors turn their attention to China’s recent stimulus package. Could this lead to further foreign capital outflows from India?

The FIIs seem to have been inspired to reconsider their Chinese investments after selling about 100,000 crores worth of shares in October alone and the Chinese markets’ spectacular recovery from recent lows. The long-term underperformance of the Chinese markets, the overvaluation or high valuation of many Indian sectors, and the stimulus packages that the Chinese have announced this year—amounting to nearly $1 trillion (nearly 6% of China’s GDP) may make this one of the biggest in China’s history. But over the next few decades, India will undoubtedly be the center of activity, and all the big FIIs will undoubtedly want to stay invested in India.

The D-Street witnessed the largest IPO of the year. Historical data indicates that many major IPOs have struggled to meet expectations. What is your perspectiveonthis?

Overall, this past Samvat 2080 was abuzz with IPOs, with 76 IPOs hitting the street, out of which almost 75%-80% trading above their issue price wherein few IPOs, the likes of Doms, Tata Tech, Jyoti CNC, to name a few turning out to be multi-baggers. However, the largest Indian IPO of all-time ($3.3 billion), Hyundai India’s number 2 carmaker with a market share of 15%, turned out to be a dud, currently down 10% from the issue price due to premium pricing and weak demand. IPOs frequency is generally tied to the market sentiments, as we see a flurry of IPOs only during bullish sentiments. Investors need to be cautious when investing in IPOs and not get carried away, rather they should do proper research before investing in IPOs.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.