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Aditya Birla Sun Life Asset Management Company expects return from equity market to range between 8 per cent and 10 per cent this year, driven largely by profit growth of corporates.
Mahesh Patil, Chief Investment Officer of Aditya Birla Sun Life AMC, said return from equity over the next one year is likely to be at 8-10 per cent as the Indian markets are at a premium over its long-term average.
The valuation will get adjusted as the profitability of corporates start inching up from the second half of this year with easing of commodity prices, festive demand and rebound of rural economy. Corporate earnings should grow at a compounded annual growth rate of 13-15 per cent over FY22-FY24 and this is higher than the 10-year average of 11 per cent, he said.
Investors should take a measured allocation to equities and it can be at the median level of the investors’ portfolio, he added. However, over the next three years investors can expect CAGR of 11-13 per cent, he said.
Other avenues
The flow into equity funds may slowdown given the fact that banks are increasing fixed deposit rates and another round of rate hike of 0.25 per cent is expected in the next RBI credit policy meeting, said Patil.
The fund house expects return from debt funds to range between 7 and 7.5 per cent, and attract highest inflows.
On the other hand, gold will start performing much better from the second half of this year, as the US Fed slows down the pace of rate hike and dollar starts weakening, he added.
Domestic focus
The fund house prefers companies with domestic focus as the Indian economy is expected to significantly outperform global peers.
In the near term, Patil said large-caps would be favoured, while given the steady domestic growth across sectors small- and mid-cap sectors could outperform large-caps over three years.
Among sectors, banking and financial services, discretionary consumption and domestic manufacturing will lead from the front, he added.
New-age companies
On the new-age companies, Patil said after a turbulent patch the winners are slowly emerging as the new-age companies are now focusing on profit.
It is now easier to value new-age companies based on the earning potential rather than their topline and the number of registered users, he added.
To sum it, India is expected to become the third largest economy from its fifth position driven by strong political leadership, demographic dividend, China plus one strategy, boost to domestic manufacturing through PLI and corporate tax rate cuts and digital revolution, said Patil.
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