ETMarkets Smart Talk: Growth vs Value – Sonam Srivastava on navigating the next leg of the market rally

In an interview with ETMarkets, Srivastava said: “While growth stocks may also experience a resurgence, the current market conditions favor value stocks due to their potential for outperformance and the underlying economic fundamentals,” Edited excerpts:

What a rollercoaster ride we are witnessing in markets. The market touched record highs but is now undergoing mild consolidation, but the trajectory is on the upside only as all dips are getting bought into. What are your views?
The recent market volatility reflects the interplay of economic and geopolitical factors. Despite a pullback from record highs, the market’s underlying bullish sentiment is evident in persistent buying during dips.

The evolving interest rate environment, slowing growth concerns, and the appeal of defensive and value stocks are shaping the market’s trajectory.

While a soft landing remains a possibility, the market’s performance will depend on how effectively central banks navigate interest rate adjustments and how global economies respond to challenges.

Maintaining a long-term perspective and diversifying your portfolio are crucial strategies for mitigating risks and making informed investment decisions.

We are seeing a bit of volatility in the global markets. But Indian market managed to climb all wall of worries and maintained its upwards trajectory largely on strong macros and fall in crude. What is your take?
India’s market resilience amidst global volatility is a testament to its strong domestic fundamentals.

The nation’s robust economic growth, increased market penetration, domestic participation, emerging industries, supportive government policies, and favorable macroeconomic factors have collectively positioned it favorably.

While external factors can still influence domestic markets, India’s strong fundamentals provide a solid foundation for continued market growth.

FMCG index has hit an all-time high, and we are seeing some smart moved in the pharma space. Is smart money moving towards consumption & pharma stocks?
The shift towards consumption and pharma stocks is a common trend at the beginning of interest rate cutting cycles.

As investors anticipate a more favorable economic environment, these defensive sectors become attractive due to their stable earnings and growth potential.

Factors like economic recovery expectations, defensive characteristics, stable earnings, and long-term growth prospects drive this trend.

However, thorough research and consideration of individual company fundamentals are essential for making informed investment decisions.

Which sectors are you currently overweight and underweight on?
We’re currently overweight in defensive sectors like consumption, consumer durables, pharma, and agrochemicals.

These sectors offer stability and potential growth in uncertain market conditions. In the rate cutting cycle these sectors should find favor.

On the other hand, we’re underweight in infrastructure, defense, railways, and PSUs. These sectors may face challenges or underperform in the current environment primarily due to high valuations. But we believe that the growth would come back in these sectors soon.

Which segment will lead the next leg of the rally—growth or value and why?
Value stocks are poised to lead the next leg of the rally. Their undervalued valuations, potential economic rebound, and favorable interest rate environment make them attractive investments.

While growth stocks may also experience a resurgence, the current market conditions favor value stocks due to their potential for outperformance and the underlying economic fundamentals.

We are seeing strong traction in the new age stocks. Looks like the growth is now catching up. What are your views?
The resurgence of new-age stocks reflects growing investor confidence in their growth potential. Factors like improved fundamentals, technological advancements, shifting market dynamics, and favorable regulatory environments are contributing to this trend.

While the new-age manufacturing and consumer durable segments are showing particular promise, thorough research and consideration of individual company fundamentals are essential for making informed investment decisions.

Overall, the resurgence of new-age stocks suggests a belief in their ability to deliver substantial returns, but maintaining a balanced and diversified portfolio is crucial for managing risk.

What about the new listing of IPOs. Any business/new sectors which you think could produce the next leg of multibaggers?
The IPO market presents exciting opportunities for investors seeking multibaggers. Sectors like consumer durables, discretionary goods, luxury goods, specialty chemicals, and new age manufacturing are particularly promising.

These sectors benefit from favorable market dynamics, growing consumer demand, and technological advancements.

Investors should look at the IPOs as not just a make quick money scheme but as potential long-term opportunities to make the best of it.

How is India placed in terms of valuations compared to other emerging markets?
India’s valuations have historically traded at a premium compared to other emerging markets. This premium reflects the market’s perception of India’s strong economic growth prospects, large and growing domestic market, and favorable demographic dividend.

Our current valuations are slightly expensive in comparison with the other markets but not extreme in any sense and we expect the market to be robust from here.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)