According to PL Asset Management, Indian equity markets have shown sustained resilience in the face of periodic volatility due to the uncertainties in the global macroeconomic and geopolitical arena as well as due to fluctuations in the prices of commodities. However, even though there could be further headwinds from the external environment which might affect the Indian markets in the short term, the growth story of India continues to hold firm.
PL Asset Management notes that much of the economic uncertainty has already been priced into the markets. With inflation remaining low, monetary policy staying accommodative, company earnings visibility improving, and government capital expenditure continuing to support economic activity, the overall environment remains favourable for Indian equities.
The firm believes investors should maintain a long-term perspective and focus on building wealth steadily over time. It holds the view that market consolidation periods should be regarded as a chance for gradually building a portfolio of quality companies with solid fundamentals and good financial health. The advice is to be conservative in the investing process, yet remain diversified across industries and sizes of capitalization.
Commenting on the market outlook, Mr. Sandeep Neema, Director & Fund Manager, PL Asset Management, said: “Although there might still be volatility due to global uncertainties and political events, in our view, most of the macro headwinds have already been discounted for the Indian stock market. The domestic economic environment is in a very good shape, thanks to the declining inflation rate, stable policies, positive domestic liquidity conditions, and increasing corporate profitability. It would be a mistake to try to time the market; instead, investors should use volatile situations to increase their exposure to well-managed businesses.”
“However, there are still some strong investment ideas in the spaces of financials, industrials, energy and power, and metals, where the earnings growth is expected to be driven by policy measures, infrastructure expenditure, and the capital expenditure cycle. In addition, we remain optimistic about some small and mid-caps with solid business models and clear visibility on the earnings front. Although, we are quite conservative on the IT sector overall owing to falling global demand and changing disruptions on the back of artificial intelligence, some companies with unique offerings present strong opportunities for investors”, Sandeep Neema added.
PL Asset Management believes that favourable demographics, rising domestic consumption, increasing manufacturing activity, infrastructure spending, digitalisation, and the formalisation of the economy will continue to drive corporate earnings in the future. While risks such as rising crude oil prices, currency fluctuations, and geopolitical developments need to be monitored, PL Asset Management believes these factors are unlikely to derail India’s economic growth over the long term.
The firm highlights that an investment philosophy centred on asset allocation, diversification, and investing in high-quality businesses is the most effective way to manage volatility and build wealth over the long term.
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