We have hit record highs in March – what do you see markets headed?
Nimesh Chandan: India is outperforming both emerging and developed markets in economic growth, macro stability, earnings growth, and political stability. The Nifty earnings have reached record levels, fueling a bullish market trend.While the Nifty has hit its fair value zone on a fundamental basis, behavioral indicators indicate a bullish sentiment, suggesting further potential for market rallies.

Short-term market direction is uncertain due to noise related to politics and geopolitics, but the medium to long-term outlook for Indian equities remains positive.

Market and economy go together. What does the GDP tell us about the strength of the economy?
Nimesh Chandan: India recorded a strong quarterly GDP growth of 8.4% for Q3FY24 and there has been an upward revision in GDP growth in H1FY24 numbers as well. This growth was mainly driven by the capex side of the economy.

This capex growth has also been broad-based with Government, Corporate and Housing sectors doing well. Consumption and Agriculture sector growth has however been soft.

The GDP print will have a positive impact on the sentiment in the equity market.

We don’t expect a change in the RBI’s outlook on rates as the WPI (deflator) is revised downwards. Hence, we don’t expect any significant impact on the bond markets.

What is you strategy given the fact market is trading around record highs?
Nimesh Chandan: We avoid attempting to time the market in the short term because it’s nearly impossible to pinpoint the exact peaks and troughs of a correction. Hence, we are not keeping any extra cash in the portfolio other than normal level. Our Balanced Advantage Fund (Bajaj Finserv Balanced Advantage Fund) had an equity allocation of 80% as of end of February in line with our allocation model based on fundamental & behavioural factors.

How should investors be positioned for FY25 – what should be the ideal asset allocation if the person is in the age bracket of 30-40 years?
Nimesh Chandan: The asset allocation for any investor must be designed based on the individual’s financial goals and risk profile. Over the long term, Indian equity markets have consistently delivered favorable returns to investors.

Long-term investors have the opportunity to benefit from investing in the equity markets. In the next couple of years, we are likely to see even the fixed-income markets generating good returns for investors as we expect bond yields to decline.

Will Dividend-paying stocks be a better play to beat volatility in FY25? What percentage of the portfolio should be placed in dividend stocks?
Nimesh Chandan: Rather than narrowing the selection to one ratio (dividend yield), one can focus on companies trading below their intrinsic value. One finds many of the quality compounders in this category.

Quality has underperformed for the past few years. Investors have focussed on value and high growth as a factor and hence the premium which structural quality companies enjoyed has come down.

What role will debt play in the next few years – do you see debt portfolios gaining popularity in retail, and HNI circles?
Nimesh Chandan: Debt is an important part of investor’s asset allocation. From, June 2024 onwards, we expect interest rates to come down in important economies globally as well as in India.

Investors can lock-in good yields currently with an aim to benefit in the next two years.

After Lakshadweep, PM Modi indicated deep water tourism. What are your views on this?
Nimesh Chandan: Tourism holds significant importance for India, with vast growth potential. We view tourism as a major trend fueled by rising per capita income and the growing influence of social media.

Investing in this sector presents opportunities to capitalize on this trend, potentially accelerating earnings growth. The diverse array of attractive destinations in India, coupled with concerted efforts from both central and state governments to promote tourism, further enhance the sector’s appeal.

Additionally, tourism has the potential to significantly contribute to foreign exchange earnings for the country.

We have seen many SME IPOs hitting D-Street compared to the mainboard so far in 2024 – how are you evaluating this trend – is it a good sign or a sign of caution?
Nimesh Chandan: While equity markets in India have the potential to generate healthy returns for investors over the long term, we find that more and more investors are looking for a quick gain. Investment horizons are getting shorter.

And there is significant retail participation in the futures and options segment. These are worrying signs. While SME IPO offers a good opportunity for smaller businesses to raise capital, the listings in that category are very illiquid & carry the risk of getting rigged. Investors should be very careful in participating in such IPOs.

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