"The outlook for the year ahead looks promising, with India's economic growth and corporate earnings keeping the markets bullish," Anshul Arzare, the Joint MD and CEO at Yes Securities says in an interview to Moneycontrol.
He feels the Indian government's focus on economic reforms and infrastructure development, along with a burgeoning tech and startup ecosystem, could contribute to the country's long-term economic growth.
With over two decades of experience in the Indian capital markets and financial services industry, Anshul suggests five themes that must be on everyone's radar now including economic recovery, technology and innovation, consumer behaviour, and geopolitical relations.
What is your equity markets outlook for the year ahead?
The outlook for the year ahead looks promising, with India's economic growth and corporate earnings keeping the markets bullish. The Indian government's focus on economic reforms and infrastructure development, along with a burgeoning tech and startup ecosystem, could contribute to the country's long-term economic growth.
Investors can look for great opportunities in emerging markets like India, and keeping a diversified and long-term perspective in your investment strategy can be a wise approach.
Ultimately, the performance of equity markets in the year ahead will be influenced by both domestic and international factors. However, uncertainty on the geopolitical front remains a concern, while on the domestic front, General Elections, inflation and interest rate trajectory are the key factors that will influence the market.
As the election year approaches, Indian equities have the potential to experience robust gains in the upcoming year due to several factors, including the forthcoming General Elections in May 2024, with a victory for the ruling party expected to provide a significant boost.
Do you see major risk for the global economic growth from ongoing geopolitical tensions?
Absolutely, ongoing geopolitical tensions can indeed pose a major risk to global economic growth. These tensions can have a ripple effect on various aspects of the global economy. For instance, they can disrupt international trade, leading to supply chain disruptions and increased costs for businesses.
Investors might become more risk-averse because of market volatility. Additionally, geopolitical tensions can strain diplomatic and economic relations between countries, potentially leading to economic sanctions or restrictions on cross-border investments / trades.
The extent of the impact depends on the scale and duration of the tensions, as well as how governments and international organizations respond to them. It's a complex and dynamic situation that requires careful monitoring, as it can influence economic growth in various regions and sectors.
Do you expect the major possibility of soft landing in the US?
The possibility of a "soft landing" in the US economy is a subject of keen interest for policymakers and economists. A soft landing typically refers to a scenario in which the economy slows down gradually without entering a recession. The goal is to avoid abrupt contractions that can lead to widespread job losses and economic hardship.
Whether a soft landing is a major possibility depends on a variety of economic factors and the effectiveness of policy measures.
The Federal Reserve and policymakers work diligently to achieve a balanced economic environment, keeping inflation in check while sustaining growth. It's important to remember that the future of the economy is influenced by numerous variables, including unforeseen events, global economic conditions, and domestic policy measures.
So, while there's always hope for a soft landing, it's difficult to say for sure, as the US economy is influenced by various factors. However, if the Federal Reserve continues to take a cautious approach to interest rate hikes, it could lead to soft landing.
Do you think the Fed is done with the rate hike cycle now?
The Federal Reserve's decisions on interest rates are complex and depend on a range of economic indicators and considerations.
While the trajectory of rate hikes is influenced by factors such as inflation, employment, and overall economic stability, it's challenging to predict with certainty whether the Fed is "done" with the rate hike cycle.
The Fed's approach is typically data-dependent, and they adjust policies as economic conditions evolve. While some analysts believe that the Fed may be nearing the end of its rate hike cycle it will be difficult to predict the timing to perfection.
Most of the experts feel oil, due to geopolitical tensions is the only risk to the Indian economic growth. Do you agree or do you see other risks too?
It's true that oil prices and geopolitical tensions can be significant risks to Indian economic growth, and they often receive a lot of attention from experts and policymakers. Oil is a critical import for India, and any substantial increase in oil prices can lead to higher inflation, increased import bills, and pressure on the fiscal deficit. Geopolitical tensions can disrupt oil supplies and exacerbate price volatility.
However, the Indian economy is influenced by a range of other factors too. For instance, domestic economic policies, fiscal deficits, inflation rates, global economic conditions, and even internal factors like infrastructure development, unemployment, and agricultural performance can all impact economic growth.
So, while oil and geopolitical tensions are undoubtedly major concerns, it's not just about them. India's economic growth is affected by a complex interplay of numerous variables, making it important to consider a broad spectrum of risks and opportunities when assessing the outlook for the Indian economy.
Do you expect the government spending to increase sharply ahead of general elections 2024, but will slow down post elections?
Government spending often increases before general elections as political parties aim to appeal to voters. Whether this spending slows down post-elections depends on fiscal discipline, economic conditions, and political dynamics. It's a historical trend, but not guaranteed. Monitoring fiscal policies and economic indicators can provide insights into spending patterns.
Also, do you see strong revival in the consumption space on government spending ahead of Lok Sabha polls 2024?
It's quite possible that government spending ahead of the Lok Sabha polls in 2024 could stimulate a revival in the consumption space. Increased government spending can boost demand and confidence, which, in turn, may lead to higher consumer spending.
This injection of funds into the economy, along with policy measures to encourage spending, can create a positive environment for businesses and consumers. However, the actual extent of the revival will depend on the effectiveness of these policies, global economic conditions, and various other factors.
So, while there's potential for a strong revival in the consumption space, optimism should be tempered with a watchful eye on how policies and the overall economic environment evolve post elections.
Themes that must be on everyone's radar now?
Economic Recovery: The trajectory of economic recovery post-pandemic is a key theme to watch, including factors like GDP growth, employment rates, and consumer sentiment.
Technology and Innovation: The rapid advancement of technology, including areas like artificial intelligence, blockchain and e-vehicles & components, offers exciting investment opportunities.
Consumer Behaviour: Keeping an eye on shifts in consumer preferences and spending patterns, including e-commerce, digital payments, and at-home entertainment trends.
Geopolitical Relations: Ongoing geopolitical developments and their impact on global markets and trade are crucial themes to monitor.
Inflation and Monetary Policy: Central bank policies and inflation trends can have significant effects on financial markets and investments.
Sectors to look out for
Healthcare and Biotechnology: The healthcare sector, especially biotechnology and pharmaceuticals, continues to be of interest, given its role in addressing public health challenges.
Renewable Energy: The push for clean energy and renewable sources like solar and wind power is a vital theme in the context of sustainability and climate change.
Infrastructure Development: Government-led infrastructure projects in sectors like transportation, utilities, and digital connectivity can present investment opportunities.
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