Daily Voice| Cyclical sectors likely to turn around and look attractive, says Rajesh Cheruvu of Validus Wealth

Asia's Tech News Daily

#MARKET OUTLOOK, #Nifty, #Sensex

With a change in the nature of economic cycles, cyclical growth sectors are likely to look more attractive. Most of these sectors have been underperformers for over five years. An improvement in capacity utilisation, emergence of a stronger rural economy, and an enhanced government spending support a strong demand outlook, believes Rajesh Cheruvu, Chief Investment Officer at Validus Wealth.

Investors should stay invested, and fresh allocations be staggered, as markets tend to get volatile after one-way rally in the past few months, Cheruvu says in an interview with Moneycontrol. Excerpts from the interaction:

The market is on a massive bull run. How do you assess the investor confidence in the backdrop of the pandemic?

The second COVID wave had caused a more severe humanitarian crisis than the first wave. Its impact on the economy, businesses, and the overall demand, however, have been minimal. This has helped restore investor confidence that the next waves of the pandemic would have a limited effect on the economic and market outlook.

The fiscal and monetary stimulus offered by the government also contributed to the revival in economic activity by defying deflationary trends of the past 10 years. Thus, the overall outlook has become more growth-oriented over the next 2-3 years.

Further, domestic MF folio additions and inflows have turned stronger in recent months, suggesting a return of investor confidence. This, combined with a shift in market-wide volumes favouring institutions from earlier retail led rallies, appears to be more grounded than earlier months.

The Midcap and Smallcap indices gained 50 percent and 66 percent so far in 2021. What would you suggest investors to approach these segments?

I believe, a revival of risk appetite and a flush in liquidity after the pandemic have led to the rally by restoring interests in mid and small caps. Also, a revival in cyclical growth around the world seems to be contributing to it. As a result, mid and small cap valuations offer attractiveness on a relative past average spread basis to large caps, although they appear expensive on an absolute basis in most cases.

Due to extensive balance sheet deleveraging undertaken by most mid and small-size companies and the absence of new CAPEX in the past few years, combined with improved demand outlook, contributing to relatively better earnings outlook. Conditional to sustaining the ongoing reflationary environment, these segments could benefit from expansion in earnings and valuations.

Given the run-up in the equity market, should the investors rejig their portfolios now? What is your take on the asset classes and the allocations?

The investors should periodically review and restructure their portfolios to get their investments doing well in every market cycle condition. Given the constructive economic outlook, the portfolios should be positioned to gain from the cyclical economic recovery with overweight allocation in equities and growth segments.

Also, other asset classes among financial asset classes appear less attractive for now; hence they could trail in returns to equities this phase of the economic cycle. Given the relative attractiveness in midcap valuations over largecaps combined with a favourable earnings outlook, midcaps are likely to outperform largecaps in the medium term. Historically, domestic liquidity-led rallies augur well for mid and small-cap performance.

What should be the investors’ approach in the current equity market scenario?

The investors should stay invested, and fresh allocations be staggered, as markets tend to get volatile and went one way in the past few months, and meaningful correction has not been seen for a while now.

Which sectors look attractive for investment now and why?

As the nature of the economic cycle is changing, we expect cyclical growth sectors to look attractive. These segments have been underperformers for more than five years or so. A recent RBI survey suggests that an improvement in capacity utilisations, revival in rural economy and government spending support a strong demand outlook.

Do you think that India is at the beginning of a bull run?

Put things into context, in the past seven years, India witnessed several structural reforms by both the government and the regulators. As a result, a reasonable amount of policy stability and aberrations got adjusted across industry segments. Indian banks and corporates have taken the deleveraging of balance sheets through asset sale, capital mobilsation and the NCLT process.

The absence of new projects by real estate players and RERA have given stability to the property prices, and helped them prepare for orderly growth. In addition, the RBI’s success in managing inflation over the past six years and monetary actions during the pandemic led to meaningfully lesser pain to the financial system and economy as a whole than any chaotic historical situation.

The government’s emphasis on indigenisation of the industry and alternative sources of energy is likely to ease import burden and currency stability. The government’s national infrastructure build-up and financing plan by shredding decade-long hesitation to expand the balance sheet by accepting higher fiscal deficit. Further, the roadmap to shred its presence in non-strategic sectors through strategic sales and asset monetisation programmes led to gaining foreign investors’ attention and market rerating.

Recent high-frequency macro data releases like improved mobility, tax collections, digital payments, order book growth and job additions point to a new economic cycle. Sustaining these gains could lead to healthy medium-term growth, translating into current market optimism.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

‘Government gave Facebook priority despite a shortage on the power grid'

Despite the pressure on the capacity of the power grid, then Minister Wiebes of Economic Affairs and Climate gave priority to Facebook for a connection to the high-voltage grid. That ... Read more »

European stocks with losses into the weekend after US jobs report

Photo: ANP European stocks entered the weekend with losses on Friday. Equity market sentiment was shaken in the closing hours of Friday’s session with new US labor market data. Prosus ... Read more »

Only fear of Covid will bring oil price down quickly

No Member of Parliament can ignore energy prices in a debate about purchasing power. The high gas, electricity and petrol prices are going to hurt more and more. “The energy ... Read more »

Je bent jong en je wilt wat: aandelen of crypto

Door onze redacteuren Mandy Fit en Cosette Molijn Amsterdam. Jongeren kunnen bijna niet om cryptovaluta en beleggen heen. Na (of tijdens) schooltijd zien ze op Instagram en TikTok rappers, voetballers ... Read more »

Time is no ally as Dems strain to finish Biden's $2T bill

The Associated PressSenate Majority Leader Chuck Schumer, D-N.Y., joined at right by Majority Whip Dick Durbin, D-Ill., looks over his notes as he prepares to speak to reporters after a ... Read more »

DocuSign, Olli's fall; Marvell Technology, Smartsheet rise

NEW YORK — Stocks that traded heavily or had substantial price changes Friday: DiDi Global Inc., down $1.73 to $6.07. The China-based ride-hailing service is withdrawing from the New York ... Read more »

DAs, retailers say California needs stronger shoplifting law

The Associated PressFILE – A security guard stands outside the Nordstrom store at The Grove retail and entertainment complex in Los Angeles, on Nov. 23, 2021. Prosecutors and retailers are ... Read more »

Struggling Chinese developer warns it could run out of money

The Associated PressFILE – In this Oct. 4, 2021, file photo, a security guard stands at the headquarters of China Evergrande Group in Hong Kong. On Friday, Dec. 3, 2021, ... Read more »

AP Source: State Department employees hacked by NSO Group

The Associated PressFILE – A logo adorns a wall on a branch of the Israeli NSO Group company, near the southern Israeli town of Sapir, Aug. 24, 2021. Tech giant ... Read more »

Help Wanted: America's childcare crisis fueled by worker shortages in daycare centers

CEFutcher | Getty Images Jessica Duckett's Teddy Bear Day Care and Preschool is feeling the effects of the nation's hiring crunch firsthand. At her Fairfax, Virginia location, Duckett said she ... Read more »

Federal corruption probe leads to first major overhaul of UAW elections in 70 years

Gary Jones, the newly-elected President of the United Auto Workers (UAW), addresses the 37th UAW Constitutional Convention June14, 2018 at Cobo Center in Detroit, Michigan. Bill Pugliano | Getty Images News ... Read more »

Fauci says booster shots likely give cross protection against 'wide range' of Covid variants

Dr. Anthony Fauci speaks about the Omicron coronavirus variant during a press briefing at the White House in Washington, U.S., December 1, 2021.Kevin Lamarque | Reuters White House chief medical ... Read more »

Sanders to Biden: Cut back looming Medicare premium hike

WASHINGTON — Sen. Bernie Sanders is asking the White House to cut back a big Medicare premium hike set to take effect in weeks and tied to a pricey Alzheimer’s ... Read more »

Holiday sales on track to blow past record for spending, topping retail trade group's biggest forecast

A person wears a face mask while carrying shopping bags in Columbus Circle on November 28, 2020 in New York City.Noam Galai | Getty Images Holiday sales could exceed even ... Read more »

Nebraska reports six omicron infections, making it the sixth U.S. state with confirmed cases

A medical worker administers a nasal swab Covid-19 test to a traveler at the Dignity Health-GoHealth Urgent Care testing site in the international terminal at San Francisco International Airport (SFO) ... Read more »

MeitY releases national strategy on blockchain for its adoption in govt systems

Representative image The electronics and IT ministry on Friday released a national strategy on blockchain for adopting the technology in government systems especially for e-governance services. The ministry has adopted ... Read more »

Chinese govt summons Evergrande founder after warning on insufficient funds

The Chinese government summoned the embattled founder of real estate firm Evergrande on Friday, after the group issued a statement warning it might not have sufficient funds to continue to ... Read more »

Parent company Blokker postpones plans for IPO for the time being

For the first time since 2015, Blokker’s parent company made a profit again this year: 57 million euros. In April 2019, CEO Michiel Witteveen of Mirage Retail Group (MRG) took ... Read more »

COVID-19: Number 10 confirms Christmas parties will be held across Whitehall as minister urges Brits to 'keep calm and carry on'

Conservative Party chairman Oliver Dowden tells Sky News that people should continue to go to the pub and dine at restaurants during the festive season, as he says the government had taken "sufficient" action against the Omicron variant so far. Read more »

Buy these defensive plays for a potentially difficult December in the market, traders say

Stocks could be in for an unusually difficult December, Joule Financial's Quint Tatro says. Though the market typically rises in the final month of the year — a phenomenon sometimes ... Read more »

Limburg car manufacturer VDL Nedcar is back to square one with a loss

VDL Nedcar can start again. It appeared on Friday morning that the American car manufacturer Canoo most likely does not want to have futuristic, electric vans built at the Limburg ... Read more »

Work underway to set up EV charging stations at 22,000 of 70,000 petrol pumps in country: Govt

(Representative image) Work is underway to set up charging stations for electric vehicles at 22,000 of the 70,000 petrol pumps across the country, the government informed Rajya Sabha on Friday. ... Read more »

Belavia airline says new EU restrictions will not affect its flights

By the summer season, Belavia plans to replenish its fleet by acquiring new aircraft, as well as concluding leasing agreements with companies that are not EU residents Read more »

Elderly Association: age discrimination in banks ‘appalling'

The elderly union calls on Minister Hoekstra (Finance) to put an end to this financial age discrimination. Instead, banks will have to fulfill their duty of care based on a ... Read more »

Kazakhstan intends to implement 180 renewable energy projects by 2030

Askar Mamin recalled that in Glasgow, Kazakhstan announced its goal to increase the volume of energy from renewable sources fivefold (from 3% to 15%) by 2030 Read more »

Tech Mahindra acquires 100% stake in Activus Connect

Tech Mahindra | Representative image Tech Mahindra on December 3 announced that it has acquired a 100 percent stake in Activus Connect, a leading provider of work-at-home customer experience management ... Read more »

Growth in US service sector reaches new heights in November

The Associated PressWaiter Juan Rodrigues, left, asks patrons to show their vaccination cards before entering the Fred 62 restaurant in the Los Feliz neighborhood of Los Angeles, Monday, Nov. 29, ... Read more »

Chinese Didi falls on Wall Street due to delisting

Photo: ANP The Chinese taxi service Didi fell sharply on the stock exchanges in New York on Friday. Investors processed the company’s announcement to delist from Wall Street and go ... Read more »

ABP rectifies ‘damage' through supplementary payments

Last year, the MAX Ombudsman showed that a group of ABP pensioners unknowingly received a pension that was too low, often for years. The broadcast led to tens of thousands ... Read more »

D-Street may see a volatile week ahead with central banks in focus

NEW DELHI: Going ahead, Dalal Street is eying a repeat of the week gone by. Volatility will be a central theme for the markets as traders jostle to grasp the ... Read more »

US: fewer new jobs added in November

Photo: ANP The number of jobs added in the United States in November is lower than a month earlier. The 210,000 new jobs that the US Department of Labor counted ... Read more »

Russia, India considering joint development of Arctic, Far Eastern hydrocarbon fields

The sides are mainly focused on energy cooperation, Yuri Ushakov said, adding that exports of Russian hydrocarbons to India are expanding, with the two countries’ mutual interest in the implementation of joint LNG projects persisting Read more »

ICICI Prudential Midcap 150 Index Fund NFO review: Should you invest?

Over the last 18 months many investors have taken to small and mid- cap stocks or schemes investing in them. ICICI Prudential Midcap 150 Index Fund is coming out with ... Read more »

Millions for green construction equipment

That is what State Secretary Van Weyenberg (Infrastructure and Water Management) wrote to the House of Representatives. The subsidy is provided because construction projects have often been shut down as ... Read more »

OneWeb is providing satellite internet service in remote areas : Sunil Bharti Mittal

Image courtesy: Twitter/@OneWeb OneWeb, jointly owned by Bharti Enterprises, the British government, and other investors has started providing internet connectivity on all areas that are above 50 degrees across the ... Read more »

Sellers: The Netherlands will bring Christmas tree and decorations into your home sooner

Photo: ANP The Dutch will be bringing a Christmas tree and other forms of seasonal decoration into their homes earlier this year. That’s what big sellers of Christmas trees and ... Read more »

JetzHub eyes foray into Indian air charter market as demand for private jets picks up

Representative image. Dubai-based JetzHub plans to enter the Indian market soon, making the private aircraft charter market in India more crowded. JetzHub is an aviation service provider of aircraft charter ... Read more »

Ural vehicles enjoy demand in more than 40 countries — Russian Deputy PM

The company’s share on the Russian market of all-wheel drive trucks is about 30%, Yuri Borisov said Read more »

U.S. Covid vaccinations spike as several states confirm omicron cases

Eleven year-old Victoria Stout receives the Pfizer-BioNTech coronavirus vaccine at Rady's Children's hospital vaccination clinic in San Diego, California, November 3, 2021. Mike Blake | Reuters Covid vaccinations spiked over ... Read more »

Shriram Properties IPO to hit Dalal Street on December 8, to raise Rs 600 crore

Shriram Properties IPO South-based residential real estate development company Shriram Properties is set to launch its initial public offering (IPO) on December 8, 2021, with the plan to raise Rs ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic