What is your market outlook? Where are you investing right now?
Vidya Bala: At this point in time, we would call ourselves being cautiously optimistic. We would welcome corrections like the one that we saw on Monday. We thought we were on a target in terms of our earnings outlook about 18% ending for FY24 and possibly mid-teens for the Nifty in FY25. But, we are getting a bit concerned about the rise in commodity prices and that could be a put off in terms of where we are expected to go for the coming year. We are keenly watching whether the sustained rise in commodities especially in metals and the inputs used for the FMCG sector could impact the earnings for India Inc for FY25.

Would you call Monday’s price action as a correction because you need at least 5-10% of price action to call it a correction?
Vidya Bala: Correct. You are right that this cannot be called any meaningful correction, but we are hoping that as the earning season kicks in, the market can very quickly punish segments that are not performing. For example, although TCS came up with the performance that kind of matched market expectations, still there are concerns in terms of the uptick in the industry overall. So, these kinds of clues can very quickly change the market mood and that together obviously with the election fever now we are hoping can give some more opportunities.

Where else do you see weakness in terms of earnings?
Vidya Bala: We are not seeing weakness per se, but we are seeing peaking out in certain segments which kept the market going last year. For example, the banking sector and many of the other cyclicals in terms of capital goods, auto, many of these kept the earnings very strong and we may see that peak out and therefore moving into FY25, we are not sure if that kind of growth momentum can be maintained.

At the portfolio level, what is your recommendation perhaps to investors? Do you think there is a large shift which should be made from smallcaps and midcaps into largecaps?
Vidya Bala: Even at the beginning of 2024, we have advocated that there is some moat and safety in largecaps, not just in terms of valuations but in terms of the earnings growth as well that is in terms of the market cap segment. But in terms of sectors, we think we are looking more keenly in sectors like consumption in pockets, not the traditional FMCG but more some of the discretionary spending spaces.

We are also looking at the banking and financial space which did not participate last year, especially some of the private banks which look reasonable now and a sustained credit uptick could definitely provide some impetus for their stock run up. We are also looking in pockets of healthcare. So, this is where our focus is.What is your view on Jio Financials? Do you think it is a stock which one should own in their portfolio without looking at near-term profits and without looking at FY25 and 26 projections?
Vidya Bala: If one were to look at fundamentals of such stocks, you would not be able to make up your mind on any kind of investment decision. But I spoke about consumer discretionary and players like Jio Financial could potentially be major beneficiaries of such spending. If you take three key factors, credit, e-commerce and social media enablers, these will basically democratise purchasing power and with that, players like Jio Finance are very well placed to capitalise with the kind of obvious breadth that they have. You could call these dark horse bets. But again, in a market that is brimming with confidence, it is very hard to say otherwise. I think a corrective phase is when you sit back and decide whether you can handle these kinds of stocks.