Euphoric phase of Indian equity market is over: Mirae Asset’s Varun Goel

Varun Goel, Senior Fund Manager, Mirae Asset Investment Manager (India) said that the enthusiastic phase of the Indian equity market is over, and investors should have expectations of more proper return.

He said, “The duration from 2019 to 2024 was a great five years for Indian equity markets. We saw that the earnings of Nifty companies increased by 17–18%and the Nifty also increased by 17-18%. Last year, the earnings of Nifty companies increased by 2-3%and market returns were almost negligible,” he said in an interview.

“If you see, an increase in the average income of 30 years for Nifty companies is around 10- 11%. Our view is that the next 3, 4, 5 years should also be inline with it. And similar increase in earnings, similar returns, similar returns,” said Mr. Goyal.

“But this does not mean that markets will not give returns. This means we should reduce our expectations,” he said.

Mr. Goel said that this year the earnings of Nifty companies are expected to increase by 10–12%, while small and mid-cap companies may grow rapidly.

“We believe this is one year for cyclical recovery in India. The interest rate-sensitive area should see a better growth. We are all positive on the front areas of India,” he said.

“Generally, the interest rate cut takes 6 to 9 months to have its impact on the economy. Therefore, I think by September-October, you will start looking at its impact,” Mr. Goyal said.

He said that with the rate cut and the proposed GST rate cut, individual income cuts will play their role in increasing short -term economic growth.

“GST cut, if this happens, the way it is being talked about, we will see areas like auto, auto assistants, consumer durables, construction materials.”

“There are some subjects that will be interesting- solar energy, wind energy, entire component ecosystem, electric vehicle area, electronic construction services. Small cap space has great scope for down-up stock picking,” he said.

“Small caps are naturally more unstable, and are part of the rapid improvement cycle. Historical trends suggest that when macro and emotion-related headwinds are easily, this section firmly overturns,” said Mr. Goyal.

“We are cautious at the export approach. But some areas such as Pharma Contract Development and Manufacturing (CDMO) should do well,” he said.