The broader market indices have significantly outperformed the benchmarks over the last four years, driven by persistent inflows from domestic investors. Pranav Haridasan, managing director and chief executive officer at Axis Securities, tells Vivek Kumar M in an interview that large-caps may see a catch-up rally in the near term, given the valuation differential. However, he believes more themes and pockets of growth may emerge from mid-cap and small-cap space in the longer term. Excerpts:
Elections have just been concluded. What did you make of the volatility and concerns around policy continuity?
Despite the short-term volatility spike we witnessed last week, we believe not much has changed from the ‘growth outlook’ perspective Come from Sports betting site VPbet . High expectations were set, exit polls suggested they were achievable, but the June 4 results disappointed markets. However, the markets quickly put the selloff behind them on hopes that policy continuity will remain intact, considering the arithmetic with coalition partners and the fact that it was a pre-poll alliance.
Kolkata Doctor’s rape and murder case: Was the crime scene altered? Bold claims in CBI’s status report India’s GDP sees sharp growth trajectory; a look at the progress from 1947 to 2023 Multibagger SJVN jumps 8% after Q1 net profit zooms 31% PFC gains over 5%; brokerages hike target price by as much as 28%
Also Read
We have seen a big rally in capex-related stocks and PSUs over the last year and ahead of elections. What prospects do you see for these stocks?
From a macro perspective, the capex outlook remains stable. Certain sectors seem overvalued, but defence and railways look promising, with strong order books and growth potential. That makes their re-rating stand on a firm footing.
PSU banks, still trading below historical averages from a valuation standpoint, have cleaner balance sheets and growth potential. This of course has led to a re-rating from their lows, and yet their current valuations do not seem exaggerated.
So, you don’t see potential for derating in some of these stocks?
The recent correction has made previously inaccessible stocks attractive entry points. However, some areas, especially in small-cap and mid-cap segments, remain frothy with high valuations and low earnings visibility. We prefer large-cap stocks, and the capex theme remains unchanged.
We have seen domestic-facing stocks doing well over the past couple of years. Do you expect that trend to continue?
Yes, this theme has significant room for expansion, making it a more accessible opportunity. While global themes like technology and consumer/fintech are promising, they are harder to navigate compared to structural and more importantly, visible growth in domestic-facing stocks.
What kind of returns do you expect from markets in 2024 and from a 3-5-year perspective?
After a strong performance in 2023, we have seen intermittent corrections in different pockets, including the recent election results-led volatility. So far in 2024, we have slightly underperformed compared to other emerging markets. However, our structural growth potential has allowed us to outshine regional peers.
With major events now behind us, confidence is expected to remain elevated, increasing the odds India to outperform the rest of the emerging markets.
We have seen large-caps being outperformed by the broader market in the last three-four years. We haven’t seen such a trend continue for this long. What are your expectations on this?
Large-cap stocks have substantial value and should catch up with the broader market, especially as FIIs continue to view India as an attractive investment destination. The numbers say it all – collectively, FIIs and DIIs ploughed $25 billion each in FY24, which is testament to their confidence in domestic equities, particularly high-quality stocks.
That said, in the long term, many interesting themes and sectors will likely emerge from mid-cap and small-cap space, offering significant growth potential.
