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    AIF & PMS Conclave 2.0: Indian equities—the opportunities, the challenges, and the silver lining

    Synopsis

    AIF & PMS conclave 2.0, powered by ET Markets, brought together some of the finest financial minds in India and chalked a way forward on alternative investment opportunities. Arun Subrahmanyam, Founder and Partner of Ampersand Capital, offered actionable insights into the Indian equity landscape—the challenges and the opportunities.

    Arun Subrahmanyam
    Agrarian distress, a sluggish job market, and widening inequality have recently acted as an antithesis to India’s otherwise formidable economic story. The silver lining: the government's financial prudence and the hope that attention will shift back to addressing unemployment and revitalisation of the rural economy. This shift could foster a new era of corporate growth and market optimism, a panellist at the recently concluded AIF & PMS Conclave 2.0 asserted.

    Arun Subrahmanyam, Founder and Partner of Ampersand Capital, believes that India’s corporate sector will register a growth of 15 to 20% in the next five years.

    “We have kept our stock market expectations slightly lower given that valuations are an area of concern, yet a 15 to 20% growth is quite achievable,” Subrahmanyam said, adding that the government's spending policies foster hope for the future.

    Subrahmanyam spoke on the topic, ‘Challenges and Opportunities of Investing in Indian Equities’, at the second edition of the AIF & PMS Conclave 2.0, held on June 19-20, 2024. Powered by the ET Markets, the conclave is India’s largest summit on alternative investing funds (AIF) and portfolio management services (PMS).

    The two-day summit witnessed 26 invigorating sessions wherein some of the most fertile financial minds from across India—including CXOs, VPs, founders, MDs, and other experts—charted India’s economic journey ahead.
    Growfast

      Equities in India
      Subrahmanyam opined that equities, in India, were typically the fastest-growing growth funds.

      “And we Indians have a knack of converging our focus on areas where growth is quite visible,” he said. “The last couple of years have been a testimony to the fact that our stock markets tend to reward growth disproportionately.”

      Moreover, he noted that Indian equities have demonstrated the ability to generate significant alpha over the last five years.

      The challenges
      Subrahmanyam asserted that the biggest challenges in India today are a low agricultural output leading to rural economic distress, a shrinking job market, inequitable growth, and market indecisiveness created by overvaluations in some sectors.

      He cited these prevailing challenges as potent factors shaping India’s recent electoral outcome. Subrahmanyam was referring to the 2024 Lok Sabha election results, declared on June 4, 2024, wherein the Bharatiya Janata Party (BJP) and its National Democratic Alliance (NDA) secured a majority, despite a significant reduction in their seat count compared to 2019. However, what is perhaps telling is the fact that BJP, led by Prime Minister Narendra Modi, won 240 seats, falling short of the 272 needed for a majority in the 543-seat Lok Sabha. This contrasted sharply with the 2019 elections that saw the BJP-led NDA winning 353 seats, with 303 of those held by the BJP.

      Although the mandate returned to the incumbent government for the third term it came with a fair share of “warning”, Subrahmanyam emphasised. It seemed to ring a wake-up call to shift the focus back to core economic issues.

      He contended that “chasing momentum” is another issue that poses a challenge in the way forward to make hay out of a less turbulent market.

      “An upfront identification of themes is crucial for market navigation. Blindly following the trends can be detrimental,” he said, adding that the market was inevitably going to go through phases of self-correction, and being oblivious to them was a mistake no one should commit.

      Liquidity, Subrahmanyam believes, is another issue that needs careful management when it comes to Indian equities, not just in micro or small caps but in the mid-cap segment as well.

      “The risk liquidity poses can be mitigated by having a judicious mix of large and liquid companies,” he said. “Large companies have growth as their primary focus.”

      The silver lining
      Subrahmanyam sees immense growth potential moving forward, with the government after being cautioned now expected to shift its focus to critical areas such as job creation, easing of the rural economic distress through investments in agriculture, and mitigating inequality in growth.

      “And if all of this falls in place, I do not see a reason the markets won’t show considerable growth moving forward,” he said. “The next five years are going to be far better than the previous five.”

      Assuming everything pans out as we expect it to, Subrahmanyam said, we are looking at a more than 15% growth in the stock market—the overvaluations notwithstanding.

      “Add inflation to the Gross Domestic Product (GDP) growth projection of 7%, and we land at a nominal GDP of 14% next year. And this situation should prevail moving forward,” he said. “Even with higher valuations the growth outlook looks promising.”

      The opportunities
      Subrahmanyam thinks that the industrial and consumer discretionary sectors are going to emerge as winners in the foreseeable future. “These are the two dominant segments in our portfolio,” he said.

      Dissecting the themes further, he shared his outlook emphasising that energy transition, digitalisation, consumerisation, and technology (artificial intelligence, in particular) are going to be the themes to watch.

      “The power sector has seen a significant surge in underinvestment, and we choose to focus on equipment suppliers. We think these companies are managed better and the growth will be superior,” he said.

      He emphasised that the auto sector was one to keep an eye on. Besides, he maintained, India was going to be an outsourcing hub for newer technologies, including AI.

      “The Fast Moving Consumer Goods (FMCG) sector will grow at a better pace than we have seen in the past few years,” he believes.

      Subrahmanyam concluded by outlining certain precautionary measures that investors should remain mindful of: an emphasis on companies with visible growth potential and strong track records, a multi-capp approach to portfolio management, caution on overvaluations, and a long-term buy-and-hold strategy.

      Watch this space as we decode the further sessions at the conclave.

      To know more about the AIF & PMS Conclave 2.0, visit the website.

      Disclaimer: The above content is non-editorial, and TIL (Times Internet Limited) hereby disclaims any and all warranties, express or implied, relating to the same.


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      (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

      Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

      Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

      ...more
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