The earnings growth of Nifty100 index in H1FY24 was 35%, while price performance was 15%, indicating undervaluation. We anticipate favorable returns on non-equity assets too, by taking low risk, including debt and commodities. High interest income and changes in monetary policy have improved the outlook for debt paper.
In the Indian landscape, current interest income opportunities range from 7% to 10.9% for a AAA and AA credit rating paper (low risk. With an expected negative trajectory in future yields, the prospect of capital gains in bonds is further enhanced, improving the overall return to approximately up to 15% over a 12 - 18month horizon. The outlook on commodities like metals (gold, silver & copper) is also positive in anticipation of a weakening in the US dollar with a reduction in the economy and interest rate.
It is a good year to consider multi-asset investments as a cut in the Fed rate in CY24-25 is positive for gold, while metals like silver, copper and rare earth are in a positive mode due to renewables & govt fiscal. India is pushing for manufacturing & infrastructure, indicating positiveness on commodities. It is a good time to diversify your portfolio when equity is expensive.
Within the equity sphere, our preference lies on large caps due to their advantageous peer valuation and fueled by the resurgence of FIIs inflows. We need to be stocks and sector specific. Sector-wise, we like Banks, Manufacturing, Cement, Chemicals, Construction, Infra and Pharma.
Mixed on Auto/Ancillaries. Neutral on Capital Goods, Defence, FMCG, IT, Power and Realty due to high valuation. Overall, we are positive on CY24; however, H2 performance will depend on the outcome of the national election, the final budget, and the
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