Interest rates have peaked; positive on India’s long-term story, says Shreyash Devalkar of Axis Mutual Fund

livemint.com:

Shreyash Devalkar, Head of Equity at Axis Mutual Fund is positive on India’s long-term story even as he believes elevated US treasury yields and the impending slowdown globally could weigh on Indian equities in the short to medium term. In an interview with Mint, Devalkar shares his views on markets and his expectations from Q2FY24 earnings. Indian equities have seen remarkable performance compared to global major indices.

Global geopolitical uncertainties are here to stay, and the outcome of that is the restriction on the free flow of capital and goods across geographies. This change in recent years has contributed to inflationary pressure and higher interest rates. This outcome is affecting global economic growth, while in India's context, the higher commodity prices (especially crude oil) have a bearing on economic growth and profitability.

We believe that India remains on a medium to long-term growth trajectory with some periods of consolidation. The midcap and small cap segment indeed has seen a sharp rally for most of this year. Consequently, the valuations of stocks are way higher than their pre-Covid level and are at a premium to large-cap companies.

Mid and small-cap space has more representation of B2B (business-to-business) companies having exposure to investment and exports part of the economy. The underperformance of consumption compared to investment and export has helped the rally in mid and small-cap. With the expectation of a global slowdown, one needs to be careful with the exports-oriented segment, though the investment part of the economy continues to do well.