How should one invest Rs 1,00,000 in this market? Religare Broking CEO Gurpreet Sidana explains

How should one invest Rs 1,00,000 in this market? Religare Broking CEO Gurpreet Sidana explains

Large-cap companies present enticing investment opportunities with their attractive valuations, robust corporate governance and promising growth outlook, according to Gurpreet Sidana, CEO, Religare Broking. In an interaction with Business Today, he shared what should be the right asset allocation strategy and which stocks should one accumulate, considering the present market condition. Edited excerpts:

BT: How do you see mid caps and small caps after the outperformance in FY24? What is your advice to investors?

Gurpreet Sidana: Mid caps and small caps have outperformed the benchmark indices by strong margins in the last 1 year and gained around 56% and 64%, respectively, which has turned the valuation expensive. Besides, certain stocks were in an uptrend without any major change in their fundamentals, which signals a caution.

The recent correction in broader indices has started reflecting those concerns however they have not fallen much yet as mid cap is down 4% and small cap 7% from their record highs. And, there will be downside risk on the broader front so investors should be selective while investing in mid cap and small cap stocks and prefer counters having reasonable valuation, healthy future growth prospects, and better financials with debt-free or low debt.

BT: So, where do you see money-making opportunities in this market?

Gurpreet Sidana: We expect select sectors to outshine others amid the prevailing phase of consolidation and investors should plan accordingly.

Among the key sectors, the private banking space, which has the highest weightage in the index, would see traction on the back of improving liquidity, steady loan growth, consistently lower NPAs, easing interest rates and better placed in terms of valuation as compared to PSUs. Besides, we may see some intermediate correction in IT. However, our bet would be for the long term and on large cap stocks rather than midcap as they are trading at an attractive valuation. Lastly, FMCG counters have seen decent corrections recently and they too are available at reasonable valuation, so investors can add names from it in a staggered manner. Further, a decent run-up is seen for cement and auto companies so maintain a “buy on dips” approach.

BT: Select PSU stocks have delivered multi-bagger returns to investors since Covid lows. Do you think the momentum will be sustained?

Gurpreet Sidana: PSU stocks have seen strong re-rating post Covid and they have gained phenomenally of around 3x returns since 2020 lows and 0.9x in the last one year.

Going forward, the pace of returns may see a slowdown and participants should utilise dips to add stocks in the space such as defence, railways, infrastructure, renewables, etc. as they are on the priority list for the planned government projects and attracting noticeable order wins and fresh investments. However, it would be critical to see how they efficiently execute and that should be reflected in their earnings and margins.

BT: What should be the right asset allocation strategy for investing Rs 1,00,000 in this market?

Gurpreet Sidana: Investing in markets primarily depends on how much risk an investor is willing to take, the time horizon for investment, which may change at different milestones of life. And, we suggest maintaining an optimum asset allocation across asset classes that is equity, debt and cash components accordingly.

The strategy for an investor whose risk appetite is minimal, allocation of funds should be in the ratio 30:50:20, which means major exposure to debt (50%), equities (30%) and remaining in cash components (20%). On the other hand, an investor with high risk taking capability can invest in a proportion of 60:20:20 where he takes more exposure to equities. However, we believe in the present environment the ideal and balanced strategy would be to invest 40% in equity, 40% in debt and 20% in cash.

BT: Which factors will drive the market going ahead?

Gurpreet Sidana: Domestic and global indicators are expected to be in favour of a steady rise, with lower interest and inflation rates and better GDP growth prospects.

Needless to say, the Indian economy is poised to be one of the fastest growing economies in the world and a better place to invest in, led by stability in the government, strong support from regulators like RBI and Sebi, also improving macro-economic environment, better demand and GDP growth prospects. This would aid markets to maintain a positive tone in 2024. At the same time, quarterly earnings outcomes are likely to be mixed but better demand and volumes along with a pickup in the rural economy would aid in the overall growth.

Also, 2024 is the year of the general election and participants are anticipating a stable government to come to power. However, any negative surprise can impact sentiments. On the global front, geopolitical tension and the US presidential election outcome scheduled in November 2024 will also be on the radar.

BT: How do you rate the work of the Modi government in the past 10 years? Which decisions do you think have transformed the country? What do you expect from the next tenure of the Modi government if he comes to power again?

Gurpreet Sidana: In the last 10 years, the government’s focus has been on formalisation of the economy, empowering the masses and encouraging industrial growth as well as centered towards developing infrastructure. Further, the government has taken some courageous steps by bringing the nation under one tax purview with the implementation of GST. Along with this, other initiatives were IBC, policies announced for the underprivileged and farmers, boosting education as well as bringing in structural changes in the banking sector which would be considered as a progressive move. From a macro-economic perspective, the focus was on declining current account deficit, increased GDP growth and growth in forex reserves has been a few positives.

During the second term, the government was faced with a fresh set of challenges like COVID, and geo-political tension which disrupted the global supply chain and further impacted economic factors like inflation and interest rates to rise. Corrective measures were taken by respective governments and central banks but India was better placed than peers to ensure stability in the economy and keep macros under check. Besides, the government further took steps to fuel the growth of industries under stress to help recover and thus introducing PLI schemes.

If the current government is voted back to power (as anticipated by the participants) then they plan to push next generation reforms and work on the long term agenda of making India a developed economy by 2047. They may bring reforms for land and digital infrastructure and also plan to spend more on EVs, artificial intelligence, logistics, advanced agricultural technology, tourism and green energy.

BT: Which stocks are on your buying list?

Gurpreet Sidana: In the run-up to general elections and the beginning of Q4 earnings, we suggest preferring a mix of large cap and large midcap stocks as that would aid in balance in the investor’s portfolio. A few names that can be included in the buying lists are Kotak Mahindra Bank and Shriram Finance from banking and finance, TCS and HCL Technologies from IT, Maruti Suzuki and Eicher Motors from automobile, ITC and HUL from FMCG, Asian Paints from paints, UltraTech and Dalmia Bharat from the cement space.

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