We have highlighted some for the past two months, while some are new. Here they are:
- FY26’s real GDP growth will be better than FY25’s. Real GDP growth of 6.5% is quite strong when one considers peer growth rates—China 4%, Brazil 2.0%, and South Africa 1.2%.
- The Nifty 50’s earnings growth will be better in FY26. Consensus estimates 12% growth for FY26 and 15% for FY27. Most large-cap companies that are domestic-oriented have given a positive growth outlook for the year.
- Fiscal policy has become demand-oriented. The impact of tax benefits will be seen in savings and consumption.
- The RBI has provided much-needed liquidity in the market. Interest rates have been cut, and two more rate cuts are expected. The 5-year G-Sec yield is down to 5.98% (last seen 3 years ago).
- Gold has appreciated by a whopping 65% in the last two years! This has strengthened the Indian household balance sheets and provides an opportunity to leverage.
- Crude oil and many other commodities have undergone a correction. Brent crude prices are currently down from USD 93 in September 2023 to USD 65. This reduces the import bill and helps the Current Account.
- As stated earlier, trade is a relative game; if your competitors are taxed more, it benefits you. Also, India has recently signed an FTA with the UK. Talks are on for a bilateral agreement with the US, too. This should boost exports.
- Rainfall is expected to be normal to above average this year, which will positively impact crop output and benefit rural consumption.
- FPI flows have turned positive. Sure, one cannot draw a trendline on flows. However, the situation is much better than H2FY25, when we experienced continuous outflows. Domestic flows continue to be robust.
Suggestion: ✨
- Large cap risk-reward is attractive.
- Select midcaps and smallcaps are attractive after this correction.
- Stick to Quality-Growth as a style. Together, both factors create value for investors and reduce risk!
- Sectors: Positive on BFSI, Consumption and Healthcare. Selectively in Capex sectors, preference is power sector.
Risk: Volatility, caused by headlines.
Remedy: Have a long investment horizon to take advantage of it.
