‘Bottom-up stock picking made more wealth in last 12 mths’

livemint.com:

Motilal Oswal Financial Services, while sector outlook is important for allocation, bottom-up stock picking has been more profitable in the past year. This trend may continue in the near-medium term, especially with the expected rise in volatility leading up to assembly and national elections. Rajgarhia shared his insights with Mint’s Ram Sahgal in the preparatory to Samvat 2080.

Edited excerpts: This Samvat has some very interesting trends, namely that the overall markets have held up very well in the past twelve months despite global interest rates ruling at over a decade high and a fragile geopolitical situation; the power of retail savings into equities is gaining further pace and the strength in the broader market exceeds that in Nifty stocks. Investors from several newer geographies are enquiring about Indian equities and this trend will get stronger. We think market returns will be in sync with the earnings growth of 15%.

However, given the event of national elections in 2024, volatility could be high in the interim. The past year has seen large caps lagging the broader markets, which has put the risk-return profile in their favour. Financials remain the favourite.

They run the best quality balance sheets, unseen in the past 15 years, and very strong RoEs (returns on equity). Autos are beginning to see volume growth with stable input prices. This sector has consolidated well over the past many years to drive performance.

Consumption in select categories keeps attracting interest. Technology will still see more consolidation till the markets get visibility of the pick up in the US economy. Manufacturing is making a comeback after a decade of low growth as we see early signs of the capex cycle.