Less chance of market repeating FY24 returns this year, says Krishnan VR of Marcellus

livemint.com:

Krishnan V R, Chief of Quantitative Research team at Marcellus, believes there is less chance of the market repeating the roughly 29% returns achieved last year. For the broader markets as well, he doesn't expect the FY24 performance to repeat this year given small and mid-cap indexes were roughly up around 60% last year, far outstripping the largecaps. He further noted that new investors who have entered markets since COVID have mostly seen the market trend in one direction which can engender false confidence of equity being a low-risk, high-return asset class.

Given the current market context, V R believes new investors should temper their return expectations from equities to more reasonable levels and avoid chasing past returns. Edited Excerpts: Difficult to put a number but the last 4 fiscal years since COVID have been largely positive for Indian equity investors with Nifty generating roughly 20% annualised returns. Small and mid-cap segments have done even better.

Nifty’s 1-year forward price to earnings is currently above long-term averages, but not unreasonably high. In the long term, earnings growth for largecaps can be expected to roughly follow the nominal GDP growth. Given this, I think there is less chance of the market repeating the roughly 29% returns achieved in FY24.

FPI inflows touched almost ₹2 lakh crores in FY24 which itself is a record after FY21. Flows were also positive in 9 out of the 12 months. This is against a backdrop of rather benign domestic macros with declining inflation, hopes of a rate cut in 2024, and lower policy risks beyond the general election.