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Aditya Khemka, Fund Manager at InCred Asset Management, has shared his insights on the outlook for the Indian stock market, specifically the Nifty index, in the upcoming Samvat 2081. While he anticipates low double-digit earnings growth for the Nifty in the next 12 months, Khemka warns that this might not translate into a corresponding expansion of the price-to-earnings (PE) multiple. He highlights that the Nifty is currently trading at a premium to its historical trailing PE multiple average, even after recent corrections. This suggests that the market's current valuation may not be fully justified by the expected earnings growth.
Given this context, Khemka identifies four sectors that he believes are poised to outperform in the coming year: healthcare, information technology (IT), consumer staples, and select telecom companies. He justifies this choice by emphasizing the defensive nature of these sectors, especially against the backdrop of other sectors, particularly those reliant on discretionary consumption, failing to deliver on anticipated growth. The telecom sector, in particular, is viewed as having a decent margin of safety due to its current valuations. This strategy aligns with the broader market trend of favoring sectors and companies capable of meeting or exceeding earnings expectations.
Khemka further underscores the importance of focusing on supply dynamics rather than solely on domestic demand in the current geopolitical climate. While demand remains strong for luxury goods and high-ticket items, he acknowledges that demand for mass-market products continues to be lackluster. However, the increasing supply in the affluent market segment points towards heightened competition, suggesting that investors should prioritize companies with relatively inelastic demand and limited competitive pressure. This focus on supply and competition underscores the importance of identifying stocks with a robust margin of safety, a principle that InCred Asset Management adheres to regardless of market conditions.
Source: Fund Manager Talk | Aditya Khemka picks 4 sectors that are likely to outperform in Samvat 2081