Daily Voice: Won’t be surprised to see a correction after elections, says Divam Sharma of Green Portfolio

As our economy expands at 7.5-8 percent per year, financial sector players will be a huge beneficiary. Nonetheless, along with growth, regulatory risks are on the horizon as we have seen during the past month.

Do you expect a significant pick-up in private capex in FY25? Will the government continue with big infrastructure spending?

Private capex may be slow until FY26. The overall demand for chemicals, pharma and textiles has slowed and most of the players in the above-mentioned space are operating well below 70 percent capacity.

We have seen some of our portfolio companies expand capacities aggressively from FY22-FY24, only to find themselves with overcapacity as the global demand suddenly shrunk.

Given the expectations of policy continuation, do you see any major reform from the government after the general elections which could be a game-changer?

Yes, much of the sector-specific rally has been supported by the budget. The industry that receives focus and allocation during the budget announcement tends to perform exceptionally for the following three years.

We expect a strengthened focus towards infra, agri-tech and electronic manufacturing during the upcoming post-election budget.

Do you expect a significant increase in savings flow to equity markets in the coming years?

We have seen banks struggling to increase their deposits and competing by offering higher rates. A major reason has been the flow of savings towards capital markets, may it be debt or equity, and away from a classic fixed deposit or savings account. We foresee this trend to continue as the equity market penetration in India is in the single digits despite the large retail flow during the past three and three-and-a-half years.

Do you still expect the market to rally 10 percent rally in the coming couple of quarters before getting into consolidation mode?

Not 10 percent. As we move towards the election date, the markets should showcase steady growth. Post-elections, however, a correction won’t be surprising. Consolidation mode is pending as earnings are yet to catch up with valuations. With that being said, we are actively allocating to under-the-radar companies whose business growth is yet to be priced in.

Do you think it would be impossible for large global investors to ignore India in the coming years?

India exposure is inevitable. Here’s the thing, global investors allocate according to the MSCI World  as the benchmark. And this benchmark only has below 3 percent allocation towards India, with more than 3 times allocation towards China, and 70 percent allocation towards the US.

Much of the outflow from China is yet to come back to India. The famous phrase “Sell China, Buy India” is yet to be reflected. We have only seen “Sell China” at the moment.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.