We see some more pain for the chemicals sector over the coming quarters as we see weak demand while the prices have not been moving up. We see exports being challenging for the sector due to destocking from customers.
We are also seeing margins being impacted as there is price erosion due to China’s competition. Fresh allocation can wait for a few more quarters.
Do you think the valuations are high in the manufacturing sector?
The manufacturing sector is witnessing a remarkable growth. The sector has also attracted and will continue to attract significant investments over the coming years. FDI flows, capital raises by companies during the recent bull run, and government policies supporting local manufacturing should continue the momentum for the sector over the coming years. We are in a long-term bull run for manufacturing.
Thrust on logistics, infrastructure creation, and favourable demographics have been a boost for the sector. PLI and China Plus One have given a huge push to the sector. Automobile, Electronics, Textile, and Pharma, look attractive in the manufacturing space. We believe that the manufacturing story has just started and the valuations in the sector should remain high considering the growth prospects over the coming years.
Will the Federal Reserve chair commentary continue to be confusing for the equity markets in the coming months?
Ongoing economic uncertainty persists, with the possibility of softer growth in the US and potential easing in both headline and core inflation. Anticipating rate cuts within the year, there may be a delay compared to the market’s expectations for an easing in March.
The landscape suggests a cautious outlook, emphasizing the need to closely monitor economic indicators for a comprehensive understanding of the evolving financial scenario.
Which are the sectors to focus on considering the interim budget scheduled to be presented ahead of general elections?
Anticipating the interim and full budget, we foresee a sustained emphasis on growth and infrastructure. The impending general elections may prompt populist announcements, shaping a positive trajectory for sectors such as infrastructure, manufacturing, and FMCG. The budgetary focus on these areas is expected to fuel momentum, aligning with broader economic objectives.
Observing these trends closely will provide valuable insights into the government’s strategic priorities and their potential impact on key sectors. We expect the growth and infrastructure focus to continue in the interim and full budget.
We also expect some populist announcements considering the upcoming general elections. Infra, manufacturing and FMCG could see positive momentum with the budget announcements.
Do you expect any major change in policies in the interim budget?
Despite the potential for surprises from the current government, we do not anticipate significant policy shifts in the interim budget. The likelihood of major policy changes remains higher for the full budget, where comprehensive and impactful announcements are traditionally made.
As we await further details, a cautious outlook suggests keeping a closer eye on the full budget for any transformative policy measures that could shape the economic landscape in the upcoming fiscal period.
Do you think the second half of FY24 earnings will remain strong after reading the provisional numbers announced in the recent past?
We believe that this will be very company-specific. The companies that have completed expansions, sectoral headwinds are not impacting growth, and which are more domestic-focused should do well in the H2FY24. The domestic growth drivers have remained strong and should continue to deliver strong growth for the manufacturing and services sector in the second half.
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