Concerns over risks to earnings growth, weak consumption, global conflicts and foreign funds moving money to China have left money managers and market mavens cautious. Returns in Samvat 2081, they believe, will be modest.
Andrew Holland, CEO of Avendus Capital Alternate Strategies, for instance, has tempered his expectations. Returns from the benchmark indices, Holland estimates, will be about 10% in Samvat 2081, less than half of that in Samvat 2080. “Earnings have to start catching up with valuations now. You’ve seen that in this results season. If you miss, the fall in prices is very hard,” Holland said.
Shankar Sharma, founder, GQuant Investech, believes the rally, which is in its fifth year, is likely to take a reasonable breather. “While we are going to see some degree of an upward trend, it is unlikely to be a repeat of the preceding four years,” he said.
Sharma pointed out that typically bull markets end in the fifth or sixth year, or at least, take a reasonable breather. “We are in the fifth year of a bull market, so simply, statistically, a cooling-off period is due, and we may well be starting that now,” he said.
Investor sentiment during Samvat 2080, which ends this week, was bullish for the most part. However, the markets have lost momentum over the past month. Since September 27, the Sensex has lost 7.5% with more than `40 lakh crore of investor wealth wiped out.
Nilesh Shah, managing director at Kotak Mahindra AMC, opined that while India’s long-term growth story is intact, green shoots on consumption as well as private investment don’t seem to be sustaining. “We expect returns across debt, equity, and gold to converge to a narrow range. Investors will have to moderate return expectations significantly,” Shah told FE.
Shankaran Naren, ED and CIO, ICICI Prudential, advocates a cautious approach: “Although India’s macros look robust, current market valuations are elevated, driven by overly optimistic domestic sentiment, which calls for a cautious investment approach.”
Shah’s mantra for 2081 will be “quality over momentum, reasonable valuations over expensive valuations, and moderate return expectations with a focus on asset allocation.”
Experts believe that the free-for-all market approach has to be substituted with moderation and quality control. ICICI Prudential’s Naren recommends investors stay disciplined and follow asset allocation strategies, particularly through hybrid and multi-asset allocation schemes.
“These vehicles offer dynamic exposure across asset classes such as equities, debt, commodities, and cash, helping investors mitigate risks associated with overvalued markets and seize opportunities during market corrections,” he added.
Ever since the March 2020 sell-off, equities have been on a steady bull run. Despite the recent fall, Nifty and Sensex are currently up over 22% and 24%, respectively, for Samvat 2080. The broader markets did even better, giving investors returns of more than 40%.
Sharma draws an analogy from cricket. “When Lala Amarnath was asked to predict the outcome of an India-Pakistan cricket test game, he said, ‘Either India wins, or Pakistan wins, or it’s a draw. Stock market predictions should be made in exactly the same way.” But he signs off on an optimistic note: “But fear not: India is the OG for finding pieces of carbon that turn to diamonds in a few years, and a drawn game is the best time to unearth those stars.”