Volatility could continue for another two weeks; Nifty may reach 23,500 by December end, says Trivesh D of Tradejini

Now that the Lok Sabha election results have been declared and the Modi-led NDA has attained a majority in a tight election race, Trivesh D, COO, Tradejini, believes the first order of business should center on reinforcing confidence in India's economic resilience and fostering an environment conducive to sustainable growth and development. Looking at the markets, the expert expects the banking sector may outperform, along with a projected earnings growth of 14 percent CAGR, a balanced target for Nifty by December end could be around 23,500.

He also advised avoiding the IT and financial services sectors for now due to tightening US yields and regulatory scrutiny over unsecured lending. For 2024, he expects the combined equity and debt foreign institutional investor flows to total $40 to $45 billion. 

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Now that the elections are over and the NDA govt is back for the third term, what, as per you, should be the first order of business?

All eyes are on the government to sustain the current growth momentum. As the NDA government is back, according to me, the first order of business will be the oath-taking ceremony and the allocation of cabinets to the ministers, and this will have a major impact on the markets. India's economy is expected to grow by 6.8% in FY25, outpacing the growth of other major global economies.

Overall, the first order of business should center on reinforcing confidence in India's economic resilience and fostering an environment conducive to sustainable growth and development.

What are some key things the markets will focus on now?

The socio-political and economic landscape of India would remain unchanged. Expectations of infrastructure spending and ease of doing business improvements may benefit sectors like construction and technology. Continued fiscal discipline could reassure investors, but global factors and economic indicators will also shape market sentiment.

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Do you believe the volatility in markets will continue in June or will there be a clear trend going ahead?

Not for the complete month of June; I mean, high volatility is going to exist for another week or two up until the portfolio allocation to the ministers and the oath-taking ceremony. This could be due to the NDA getting the majority instead of just the BJP, resulting in a mixed allocation of portfolios and departments to new ministers or non-BJP ministers which could heavily affect the markets at least for the short term.

What is your Nifty target for December-end now?

Looking at the markets the banking sector may outperform, along with a projected earnings growth of 14 percent CAGR, a balanced target for Nifty by December end could be around 23,500.

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Do you believe the RBI will cut rates in the upcoming meeting?

No, what I anticipate is that in the upcoming monetary policy review, the RBI is going to maintain the benchmark repo rate. I am also expecting the monetary policy committee to uphold the status quo, with no change in stance especially because it remained unchanged from the past 7 meetings.

The RBI will likely sustain tight liquidity conditions to keep short-term rates elevated and bolster the rupee. The current liquidity deficit may ease post-elections, as increased government spending is projected in the forthcoming months.

What market strategy would you advise investors in the current market scenario?

I would like to adopt a nimble and selective strategy, which can be achieved by focusing on businesses with consistent earnings growth and reasonable valuations and avoiding the IT and financial services sectors for now due to tightening US yields and regulatory scrutiny over unsecured lending.

Read here: Avoid ‘narrative’ stocks, focus on fundamentals, says Kotak Institutional post election results

Post the election season, the market conditions may offer opportunities and I would advise investors to proceed to take the best out of them with diligence and prudence in their investment strategies.

Will it provide respite to foreign investors and bring the inflows back?

FPIs are going to return to India. There will be an inflow of foreign investors in the coming months as the winning party has been perceived as a pro-business and investor-friendly government and this will successfully attract foreign companies like Apple and Tesla, diversifying supply chains beyond China. I think the electoral mandate will further boost foreign investment inflows, along with foreign portfolio investors. Foreign capital flows would reach $1-2 billion weekly after the election leading up to the index inclusion date. I would also add that the Indian rupee is likely to become the third largest currency component after China’s renminbi and South Korea’s won.

Overall, we expect the combined equity and debt foreign institutional investor flows to total $40 to $45 billion.

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Is the time right to shift one's focus back on largecaps even as mid and smallcaps have been outperforming?

Instead of making a distinction between largecaps, midcaps, and smallcaps, I would suggest concentrating on the fundamentals and conducting thorough research. It makes no difference if you invest in a large, mid, or small-cap company—staying bottom-up and seeing long-term potential is important. You should prioritise businesses that are capital-efficient and can benefit from favorable market conditions. As long as these criteria are met, your investments are likely to outperform the market.

Key sectors you would bet on?

Power and infrastructure are the two main industries on which I would place a bet, especially in light of the Ministry of Power's draft national electricity plan, which called for an investment of about ₹4.75 lakh crore and included potential projects like bullet trains, enlarged highways, and waterways. I would also like to add that the hospitality industry is growing and on the verge of reaching pre-2007 levels in terms of ADR and occupancy rates. Additionally, I would suggest keeping a watch on the real estate, hospitals, and renewable energy markets, which are booming due to post-COVID demand and supportive policies.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.