Although revenue growth rates of 12-13% may not seem particularly strong at first glance, he believes this represents a reliable target given the general global uncertainty, he said in an interview with ET Market.
Edited excerpts from the conversation:
Given global uncertainty and domestic growth trends, what is your outlook for the stock market for the next 12-18 months? Is this the time to buy fear?
The global environment remains extremely unstable and there is uncertainty surrounding tariff-related actions by the new US administration. On domestic flights, conditions appear to be improving as high frequency indicators suggest a return to normalisation of growth. Following the market revisions over the past six months, the valuation of stocks, especially on a large scale, seems reasonable now. As a result, the stock outlook has improved from a 12-18 month perspective. However, given the inherent volatility of the stock market, investors believe that ideally need to adopt a long-term perspective with a minimum investment period of 3-5 years. Stock investments should be limited to funds that investors don’t expect to need for at least the next three years.
For such a long-term perspective, the Indian stock outlook remains positive and supported by a favorable demographic. India’s large, young population is aiming to improve living standards, including better housing and automobiles. These basic aspirations alone can drive significant economic growth. Furthermore, various other evolving social needs, when met, contribute further to the economic expansion and stock market returns.
Therefore, we argue that the long-term outlook for Indian stocks remains very constructive and in our view, stocks continue to be the most effective asset class for long-term wealth creation.
How do you see the Indian market reacting in the short term as interest rate cycles change globally?
After a relatively synchronized period of central bank policy action, we are now witnessing differences in interest rate cycles around the world. The US Federal Reserve maintained its current status on interest rates in its latest monetary policy, but the Reserve Bank of India (RBI) implemented its first cut in five years in February. Additionally, the possibility of additional rate reductions in future April policy reviews remains fairly high. Meanwhile, Japan’s central bank is expected to raise interest rates in the coming months.
The stock market generally favors low interest rates, and further interest rate cuts by RBI will provide additional support for market sentiment. However, interest rates are an important factor, but not the main concern of the stock market in the current environment. In our view, a key determinant of the stock market outlook continues to be progress towards a revitalization of economic activity and corporate revenue growth over the next few quarters.
Which sectors do you believe are the most promising for long-term investors?
The banking sector is attractive in terms of risk reward. While revenue growth could ease as credit costs normalize from historically low levels, banks expect to provide strong returns for stocks (ROEs). Currently, most banks trade at a discounted price to a book (P/B) multiple from historic prices, so private banks believe they provide a compelling opportunity to generate returns across the wider markets.
Companies and sectors that are well-located to meet the evolving needs of India’s growing population may present the most attractive long-term investment opportunities. The success of the company in the food delivery and quick commerce segment, uniquely suited to the Indian market, reveals the potential for growth opportunities within the broader consumption sector. Furthermore, economic financialization continues to create attractive businesses.
These segments also offer great potential in the domestic manufacturing sector, particularly in areas such as energy transition, electronic manufacturing, railroads and defense, as they provide strong growth potential and revenue visibility over the medium term.
However, it is important to always be aware of the valuation, as the outcome of your investment is largely determined by the price paid.
How do you approach asset allocation in a volatile market scenario to ensure consistent returns for policyholders?
Asset allocation is an important component of financial planning, and a well-structured asset allocation framework can help investors achieve superior, risk-adjusted returns. In this context, the role of an experienced financial planner is important as asset allocation decisions need to be tailored to the individual’s specific needs and financial situation. While all investors aim to maximize returns, the focus should be on making strategic asset allocation decisions that are consistent with their own financial goals and risk tolerance.
In recent years, there have been significant changes in storage patterns. Traditionally, savings were concentrated on physical assets such as real estate and gold. However, they are currently gradually moving towards financial assets such as insurance, mutual funds, and direct stock investments. We believe this change represents an early stage of structural transformation.
As savings finance accelerates, the importance of efficient asset allocation becomes even more pronounced. Given the complexity, we highly recommend seeking professional financial advice to optimize asset allocation and enhance long-term wealth creation.
With the launch of the Bajaj Allianz Life Focused 25 Fund, how does a concentrated portfolio of up to 25 high-growth potential inventory offer a way to offer an advantage over diversified funds?
The growth and thriving entrepreneurship of the Indian economy has produced several comparative partners for stock investors. However, few companies are better than others over the long term. For example, over 25 shares have contributed over 70% of index returns within the Nifty 100 index over the past five years. Identifying such winners and assigning large weights to such stocks in the portfolio could generate better portfolio returns.
What are your expectations from the fourth quarter revenue season? Do you think the worst downgrade lies behind us? Are we now in a phase of progressive revenue recovery and growth?
The fourth quarter revenue outlook shows a slight improvement compared to trends observed over the last three quarters. As a result, FY25 is expected to end at a single-digit medium revenue growth rate of the Nifty 50, marking a perennial low.
However, the focus is currently shifting to FY26 revenue. This is expected to increase by 12-13%, following a 5-6% downgrade in revenue over the past six months. Although revenue growth rates of 12-13% may not seem particularly strong at first glance, given the general global uncertainty, we believe it represents a reliable target.
Looking forward to FY27, early estimates suggest a similar 13% revenue growth rate. If achieved, this supports India’s ability to maintain multiples of relatively premium ratings.
