Expert view: Nifty 50 may give a double-digit return in FY25: Naveen Kulkarni of Axis Securities PMS

Expert view: Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS believes earnings of Nifty 50 may grow by almost 20 per cent by the end of FY24 and the Nifty 50 may deliver a healthy double-digit return in the low to mid-teens in FY25. In an interview with Mint, Kulkarni also shares his views on several sectors and how the markets could behave after the General Elections. Edited excerpts:

We are ending FY24 on a healthy note. What are your expectations from our market for the next financial year? Are we at the end of a bull rally?

The market expectations are quite evident. NIifty 50 earnings are likely to grow by almost 20 per cent by the end of FY24, and in FY25, we expect to see 12-14 per cent earnings growth. 

Additionally, with the interest rate cuts indicated by the US Federal Reserve, valuations are more likely to remain stable globally.

The preference for risky assets like equities will continue to remain high. As the Federal Reserve could cut interest rates by three times this year, we believe even the RBI could cut rates though only marginally.

Considering the consistent earnings growth and an easing interest rate environment, the Nifty 50 may deliver a healthy double-digit return in the low to mid-teens. Apart from Nifty 50 delivering double-digit returns, the overheated small-cap space could see some consolidation on the back of a phenomenal year.

The small-cap space is unlikely to see a very sharp correction, but returns are likely to be modest. The small-cap space will be entirely stock-specific in FY25.

Thus, we can expect the Nifty 50 or large-cap index to deliver slightly better returns than the broader market, but stock picking will remain the key to outperforming the market.

What sectors can outperform in the next one to two years? Should we bet on defensive or cyclical?

Cyclical sectors, such as metals, could do well in the next one year. Defensive sectors like IT or consumer staples could take longer to catch up, while utilities will see continued outperformance in the next one year. 

Large private sector banks are expected to deliver healthy returns in the next 12 months, while sectors like IT will likely deliver returns in the year's second half. 

We expect the auto sector to have a softer year than FY24, but the structural trends will remain intact. Key sectors will be private banks, utilities, oil and gas, and cyclicals like metals, which are likely to do well in the next 12 months. 

The IT sector could take some time, but it may see traction in the year's second half.

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Is the pessimism about the IT pack overdone? Should one bet on the IT sector for the next one year?

Accenture reported numbers that were not particularly encouraging for the IT sector. In this scenario, the sector will take some more time to see improvement. 

However, it is expected that IT stocks will perform well in FY26 as visibility emerges. FY25 is expected to remain a mixed bag, but FY26 will be a good year. 

As we get clarity on FY26, we expect the sector to see a good rally, mostly in the second half of the fiscal year.

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The automobile sector has generated hefty returns over the last year. Do you expect the sector to remain on an upward trajectory or will they lose some steam now?

As indicated earlier, FY25 is unlikely to be as strong as FY24. The passenger vehicles segment may see a softer year than FY24. 

The tractor industry will also see weak trends, but two-wheelers will continue to do well in FY25. 

Overall, the sector is on a strong structural trajectory and will continue to perform well, but it may not see a repeat of FY24.

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The market seems to have already factored in the return of the ruling party following the General Elections. Should this scenario materialize, could we anticipate a fresh phase of bullish market activity?

We expect the market to run up ahead of this event because it is a consensus trade. However, election results will give that event permanence, and markets could continue to rally. 

Broadly, it's better to expect the run-up to happen before the event. However, post-elections, markets are likely to resume their normal course.

Please tell us about some emerging investment opportunities other than equities. Are you positive about them?

We expect sectors like private banks, cyclicals, two-wheeler stocks, utilities, and oil and gas to outperform. 

Overall, market returns are expected to be mid-teens, providing ample time to choose stocks and explore various investment opportunities.

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Disclaimer: The views and recommendations above are those of the expert, not of Mint. We advise investors to check with certified experts before making any investment decisions.