The outcome of the recently concluded assembly elections in five states has sent a clear message that the uncertainty surrounding the upcoming general elections has dissipated, says Nitin Agarwal. CEO, Torus ORO PMS.

“With Prime Minister Narendra Modi’s strong showing, investors can now anticipate continued stability and a focus on growth-oriented policies. This aligns perfectly with India’s ambitious journey to become the world’s third largest economy,” Agarwal said in an interview with ETMarkets. Edited excerpts:

What is the tone and mood of your clients suggesting about the upcoming general elections?
Nitin Agarwal: The recent state election verdict has sent a clear message: Uncertainty surrounding the upcoming general elections has dissipated.

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With Prime Minister Narendra Modi’s strong showing, investors can now anticipate continued stability and a focus on growth-oriented policies. This aligns perfectly with India’s ambitious journey to become the world’s third largest economy.

Previous terms have been marked by pro-business and investor-friendly initiatives. From infrastructure development to digitalization, these policies have laid a strong foundation for future growth.

The recent electoral outcome signals a continuation of this approach, creating a positive outlook for various sectors.

This positive sentiment surrounding the upcoming elections has translated into optimism among businesses and investors. It creates a fertile ground for increased investments, both domestic and foreign, further accelerating India’s growth trajectory.

In the run-up to the general elections, how should investors go about their stock-selection strategy?
Nitin Agarwal: India’s growth story is undeniable, but the journey won’t be smooth. While long-term optimism is warranted, investors need to embrace short-term volatility as a natural part of the market cycle.

Markets rarely follow a straight line. Past performance, while instructive, shouldn’t solely dictate future expectations. Instead, focus on realigning your expectations with future potentials, even if it means accepting temporary dips. Remember that mainline indices have repeatedly delivered multibagger returns despite interim drawdowns, proving the power of long-term perspective.

How are you playing the current market momentum? Are there any interesting bottom-up opportunities?
Nitin Agarwal: The recent market rally highlights the need to shift focus from short-term valuations to identifying long-term megatrends that will reshape the economic landscape.

We believe in proactively positioning portfolios to capture these trends, moving beyond past successes and embracing what the future holds.

India stands at a pivotal moment, poised for a transformational decade driven by domestic strength and global investment appeal.

We advocate for a shift toward sectors that will be at the forefront of India’s growth trajectory viz consumer discretionary, infrastructure, manufacturing and green energy.

Which are the underlying domestic themes that you’re extremely bullish on and believe will do well in the longer term?
As India leapfrogs to become the 3rd largest economy, we will see a rise in the per capita income in line with other economies which witnessed similar growth.

Based on cues from China, discretionary spending grows disproportionately on account of a rise in per capita income.

If we draw parallels with China, we can expect to see significant growth in categories such as travel, healthcare, out-of-home consumption, branded goods, leisure, and recreation. These categories could grow by as much as 5x to 20x compared to other categories, which may only see sub-5x growth.

Second, we are extremely bullish on the revival of the capex cycle theme. Capital formation in India is at a 15-year high, with the latest gross fixed capital formation (GFCF) to GDP ratio at 35%.

Third, we are betting on the transition towards green energy. India is on a mission to double its energy capacity to 1,000 GW by 2030. While the overall capacity is expected to grow by 2x, the contribution of renewable energy sources is expected to grow by 3x, providing a huge runway for growth.

Do you think 2024 will be a tough year for identifying multibaggers compared to last year?
The broad-based market rally in 2023 might not be the defining characteristic of 2024. This year, we anticipate a shift towards stock-specific focus, where the spotlight falls on companies with exceptional potential and the ability to deliver.

It would be important to identify companies positioned in sectors with significant long-term growth potential, with a proven track record of execution capabilities available at reasonable valuations.

Do you see frontline sectors such as BFSI and IT taking the lead in 2024 after their underperformance in 2023?
Nitin Agarwal: BFSI provides the strong backbone to kickstart the capex cycle. The recent budget made it very clear that going forward, heavy-lifting will be done by the private sector and, thus, it will be a great opportunity for BFSI to become the catalyst to kickstart private capex.

Thus, we are very bullish on BFSI on account of a huge growth runway along with reasonable valuations.

On the IT front, since a lot depends on global factors and with developed economies not out of the woods, we are little cautious on the sector and will build our exposure slowly.

From a valuation standpoint, how are you reading the Indian market?
Nitin Agarwal: We feel based on the bullish phase of the market, markets are fairly priced and, hence, any negatives on expectations may lead to drawdowns. We are building positions in holdings where we still find that valuations are reasonable.

Given the slew of events lined up on both the domestic and global fronts this year, what would your asset allocation strategy be?
Nitin Agarwal: We strongly believe in India’s growth story and would advise investors to have a significant exposure towards equities without taking a short term view.

We believe that this will be India’s decade as it experiences a transformation from this inflection point which will benefit the investors who can stay invested for the long-term.

Even fixed income provides an interesting avenue and thus we advise investors to also take some exposure since the global rate cycle has peaked and interest rate will cool off providing a good entry point for investors to build fixed income allocation.

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

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