Earnings slowdown in first half of FY24-25 can be largely attributed to election related slowdown and monsoon related disruptions. That said, urban middle class consumption continues to be a worry, which will impact businesses focusing on that segment.
We are now getting into a seasonal phase where infrastructure spending will pick up to utilize annual budgets. This should give a good boost to economic activity all around – from infra companies to their support ecosystems as well as banks whose credit growth can pick up.
Markets are consolidating after a strong run up – which is healthy in a long term bull market. As long as you are not over-extended inequity, stay invested through this correction, advises Venugopal.
He also suggests that investors need not unnecessarily exit mid and small cap funds in favour of large caps, fearing any huge meltdowns in smaller companies. Alpha over the longer term in India will continue to be delivered by smaller companies. Stick with good midcap and small cap funds.
Venugopal continues to favour infrastructure building, manufacturing, consumer discretionary and IT. He is circumspect on global cyclicals as it is difficult to judge how China is going to play out.
He believes banks are due for a good rally now – they have valuation and earnings comfort and with credit growth expected to pick up, there is room for optimism in this space.