“As such, further upmoves require growth surprises hereon – in the context of a slowing global economy and some moderation locally too – this seems unlikely,” Raman, who oversees assets worth Rs 35,000 crore, said in an interview with ETMarkets.
Historically, markets have peaked with the peak in the US rate cycle, and as the US Fed cuts rates, markets take cognizance of the growth slowdown ahead and, therefore, turn nervous. So, 2024 may witness some two-way volatility due to the turn of the global rate and growth cycles, believes Raman. Edited excerpts:
How did your PMS perform in 2023, a year that turned out to be one of the best in history for equities?Shankar Raman: In 2023, our PMS funds, particularly multi-cap portfolios, demonstrated strong outperformance compared to benchmarks. Notably, within mid and small caps, our PMS products exceeded benchmarks.
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However, it’s important to acknowledge that some portfolios, both in PMS and MFs, did not surpass the benchmark performance in 2023.
What’s your overall outlook for equities for 2024? What are the key factors that will drive inflows?Shankar Raman: The outlook for equities is constructive given that we are on a virtuous earnings cycle and liquidity and sentiment too, are favourable.
However, some of the performance has been frontloaded in the last 1-2 months and, thus, pose risks for 2024, given the low likelihood of earnings upgrades hereon.
That said, given the very favourable sentiment towards India and the significant interest among domestic investors too, flows into equities would likely remain robust in 2024.
According to you, what Budget 2024 could look like given it’ll be an interim one?
Shankar Raman: The Budget in February should be a vote-on-account, largely to pass expenditures committed in FY24 and would not have policy announcements given elections in May-June. The Budget in July would be important to watch out for cues on the government’s longer term policy orientation. Which are the top 5 sectors that you will be betting on in 2024?Shankar Raman: We like banking, industrials, capital goods and infrastructure, power, and select urban discretionary consumption like real estate.
Do you see funds increasing cash levels closer to the big event like general elections?Shankar Raman: While there could be some anxiety around political outcomes, extreme outcomes seem unlikely.
As such, if global conditions, especially on liquidity, remain stable, funds may be wary of the risk of sitting out (being in cash) rather than being invested. If so, they may not choose to take large cash calls ahead of the elections.
What kind of investment strategy would you advise clients in the run-up to the event-heavy 2024?Shankar Raman: A fair part of the returns expected in CY24 have probably come through in the last 2 months or so as the markets globally have discounted a steep rate cut cycle.
As such further upmoves require growth surprises hereon – in the context of a slowing global economy and some moderation locally too, this seems unlikely. Historically, markets have peaked with the peak in the US rate cycle and as the US Fed cuts rates, markets take cognizance of the growth slowdown ahead and, therefore, turn nervous.
As such 2024 may witness some two-way volatility due to the turn of the global rate and growth cycles.
In this context, investors should consider staggering their investments over the next few months to benefit from this volatility even while extending the investment horizon and moderating their return expectations especially over 2024.
Besides, portfolios could be tilted in favour of largecaps given the favourable relative valuations vis-à-vis mid- and smallcaps.
The sharp broad-based move in 2023 could well give way to more nuanced market movements in 2024, with sector and stock divergence widening, thus providing opportunities for bottom-up and active portfolio management.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
