December 13, 2024

Nifty EPS Growth Slows to 7.9% YoY in FY25, Warns Emkay Wealth Management

Mumbai, 29th November 2024: Emkay Wealth Management, the wealth management and advisory arm of Emkay Global Financial Services held a virtual media round today – estimates the Nifty EPS growth for FY25 at 7.9%, the team believes the current market valuations are in expensive territory and the market may witness some consolidation or a time correction. Markets are likely to pick up once earnings growth shows up. According to Emkay Wealth, there are ample stock specific opportunities in the current market. So, PMS, AIF and active fund managers should do well.

Parag Morey, Head of Sales, who opened the Media Round Table stated that Emkay Wealth Management is currently offering bespoke services to over 3000 plus families to date. The current assets which Wealth Division manages has grown to over Rs 20,000 crore.

Market set up

The Indian listed universe’s M-cap to GDP ratio hit 1.4 or 140% earlier this year, which is a 15-year high. A strong indication of how overvalued the Indian markets are. However, domestic investors continue to pour money into Indian equities. The long term performance has been the best in Midcaps stocks.

Asset allocation

Investors should look at the US market for portfolio diversification. An ideal balanced/moderate investor should look at a portfolio allocation of 50:50 equity and debt and within the equity allocation have 30% equity in US stocks (15% overall ). The US markets provide good technology exposure, that is not available in India.

There is some case for investment in debt, as given the current level of interest rate and the likelihood of RBI easing rates in the next few quarters, there is a tactical opportunity to invest in debt. But, equities will definitely deliver higher returns vs debt from a 3-year perspective.

Monetary policy – we are already in a rate ease cycle

The US and other western central banks have already started lowering rates. With the Trump Presidency in the next few weeks, we expect a lower rate regime for a longer tenure. The US lowering rates will move funds from the US, and Advanced economies to EMs. The RBI announcing changing its policy stance to neutral is a big positive, MPC is likely to cut rates from Q1CY25. A spike in CPI has pushed the rate easing cycle. The current high food inflation is transient, the MPC is likely to cut rates anywhere between 25-50 bps. The housing sector will be the biggest beneficiary of the rate cut by the RBI.

Outlook

The current market provides ample opportunities for stock pickers. So, the PMS and AIF and active fund managers should do well. Active fund managers are likely to post a higher alpha for its investors.

IPO

The IPO market will change going forward, it will see some moderation as investors become more discerning. Companies with unique business models will attract investors’ attention and interest. Spate of IPOs has made India a much wider market than what the indices indicate.

Speaking at the Media Round Table, Dr. Joseph Thomas, Head of Research, Emkay Wealth Management said, the domestic economy is poised to grow at 7% as the economy is structurally tuned to grow at that rate. The large public capex, the favourable liquidity conditions, and the likelihood of lower interest rates augur well for economic growth.

Mr. Ashish Ranawade, Head of Products, Emkay Wealth Management said, the current market offers opportunities for stock selection as pockets of attractive valuation exist . We may not see a broad-based rally across the board, but there are ample opportunities for growth and wealth creation within Indian Equities

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