Euphoric phase of Indian equity market is over: Mirae Asset’s Varun Goel

Varun Goel, Senior Fund Manager, Mirae Asset Investment Managers (India), said the euphoric phase of the Indian equity market is over, and investors should have more reasonable return expectations.

“The period from 2019 to 2024 was a great five years for Indian equity markets. We saw Nifty companies’ earnings grow 17-18% and Nifty compounded also 17-18%. Last year, Nifty companies’ earnings grew 2-3%and the market returns were almost negligible,” he said in an interview.

“If you see, the 30-year average earnings growth for Nifty companies is around 10- 11%. Our view is that the next 3, 4, 5 years should also be inline with that. And similar earnings growth, similar kind of returns,” Mr. Goel said.

“But it does not mean markets will not give returns. It means we should moderate our expectations,” he said.

Mr. Goel said this year Nifty companies’ earnings are expected to grow10-12%, while Small and mid cap companies can grow faster.

“We believe this is a year for cyclical recovery in India. Interest rate-sensitive sector should see better growth. We are positive on all the India facing sectors,” he said.

“Normally, interest rate cuts take 6 to 9 months to have their impact on the economy. So, I think by September-October, you will start seeing the impact of that,” Mr. Goel said.

He said rate cuts and the cut in personal income tax along the proposed GST rate cuts will play their role in boosting short-term economic growth.

“GST cut, if it happens the way it is being talked about we will see sectors like auto, auto ancillary, consumer durables, building materials will benefit,” Mr. Goel said.

“There are certain themes which would be interesting- solar energy, wind energy, the whole component ecosystem, electric vehicle sector, electronic manufacturing services. There is a lot of scope for bottom-up stock picking in the small cap space,” he said.

“Small caps are inherently more volatile, and sharp corrections are part of the cycle. Historical trends show that when macro and sentiment-related headwinds ease, this segment tends to rebound strongly,” Mr. Goel said.

“We are cautious on the export outlook. But some sectors like pharma contract development and manufacturing (CDMO) should do well,” he said.