Direct Equities: Focus beyond ‘election results’ related ups and downs

Momentum in global equities falters as reappraisal of Fed rate cuts trajectory & Middle-East geopolitics take toll: Stock market sentiment was dampened in April with heightened volatility and broad-based weakness across most regions on the back of rising geopolitical tensions & worries of a push-back in interest rate cuts by the Fed on the back of stickiness in US inflation.

Highlights
 

• Strong GDP growth, manageable inflation, likely political stability and increasing weightage in global benchmark indices – positive macro narrative to invest in Indian equities remains intact.
• Barring an oil-shock, we expect equities to see more volatility but stay resilient till early June (General Elections results week). We suggest investors take cues from FY24 results & mgmt. commentary to rationalize portfolio holdings.
• Emerging markets saw net outflows in April. South Korea, Indonesia and India have seen positive net inflows YTD.
• Over the past year, Realty index has more than doubled while PSU bank/ Auto indices gained ~80/~70% respectively.
• Sectors: (1) BFSI is our preferred sector considering reasonable valuations. (2) Selectively favor stocks in logistics, consumption & auto. (3) Rich valuations keeps us on sidelines in case Capital Goods (4) IT stocks may look interesting as multiples moderate.