Moving past the current interest rate cycle, we expect a more favourable outlook for FY’24. said Prakash Kacholia, Managing Director, Emkay Global Financial Services. However, Kacholia, who has been on board of the SEBI Committee on Derivatives and also served as a Director on the boards of BSE and CDSL, said markets will remain edgy and volatile on political developments.
FY24 started on a cautious yet positive note. What is in store for the rest of FY24?
Since reaching its peak in September 2022, the market has remained range-bound, despite significant global events such as a 450 bps increase in US bond yields, a 20 per cent appreciation in the DXY, the Ukraine war, and a steep rise in crude oil prices. India’s economy has become more resilient with structural improvements visible in twin deficits (and more so on the external front) and inflation outlook.
While it’s not uncommon for bear markets to last up to 18 months, we anticipate a more favorable outlook for FY24 as we move past the current interest rate cycle. India will most likely witness a soft landing – rising at about 6.2-6.4 per cent. We expect interest rate to become more accommodative later in FY24 and that should stage the recovery of earnings momentum and valuations as well..
Major factors that could affect market in the short-term?
Our base case is that inflation has peaked in the US and India and will decline along expected trajectory. Market expectations embed a cut in Fed rate late this year and any dislocation or reset in FED expected rate curve could create a risk off environment.
Secondly, back home India faces quite a few prominent State elections this year and general elections next year. Markets will remain edgy and volatile on political developments. We are not too worried about El Nino and other minor developments which will have marginal impact on fundamentals.
What is your reading of the results announced by the India Inc so far?
With the exception of software companies, most firms have reported results that meet or exceed expectations. For software, US has been a pain point and more so for firms depending on financial sector and on discretionary consulting practise. However, banks have benefited from expanding net interest margins and lower credit costs. Consumer companies, on the other hand, have reported lacklustre sales in rural areas.
Active traders are declining at brokerages. What are their major concerns?
Trading activity is cyclical. While there was a surge in trading during the pandemic, a return to normal levels was expected following the heightened activity. In addition, the SEBI has been proactively addressing margining requirements, including intra-day trades, to prevent unhealthy speculative activities. This lesser-known fact has contributed to a healthy trading environment and should instill confidence in market participants.
Is Emkay also witnessing same trend? What are Emkay’s plans to revive investors’ interest?
Emkay’s primary clientele consists of delivery-based investors rather than day traders, and institutional business is a significant component of business model. Although there has been a decline in cash market volume that may impact overall investment activity, we recommend clients to focus on constructing a long-term investment portfolio based on in-depth research and analysis. By adopting a long-term investment strategy, clients can benefit from market ups-and-downs, and potentially generate higher returns over time, despite short-term market volatility.
Emkay Global is also planning to enter MF business. How confident are you in that space, given the high level of competition?
Our confidence stems from our diverse product offerings and advanced technological tools and solutions. We have over a decade of experience managing clients’ funds through AIF and PMS, which gives us an edge in this new territory. At the heart of our approach is understanding our clients’ needs and providing them with tailored solutions that align with their investment objectives, and we have a proven track record of doing so.