Indian markets continue to be fairly priced relative to global valuations
Strong India growth may support higher valuations in the medium term
Monsoon worries due to the El Nino effect cannot be ignored
Mumbai :- Emkay Wealth Management, the wealth management and advisory arm of Emkay Global Financial Services held a virtual media round today – a discussion on the importance of asset allocation, opportunities, and challenges to invest at a time when the Indian equity markets are scaling newer peaks.
Emkay Wealth Management is currently offering bespoke services to over 2,100 families to date. The company has consistently grown with a healthy rate of growth across all parameters such as AUM, Revenue & Client base.
Asset allocation
Emkay believes in dynamic asset allocation for large portfolios even as smaller portfolios stick to the basic asset allocation driven by a client’s risk profile. At the current time, all three primary asset classes namely equity, fixed income and gold are into play. However, selective exposure within these asset classes can generate better returns. As per them, select small and mid-caps can outperform as the valuation gap with larger peers closes. Emkay Wealth prefers structural growth companies over cyclical ones as the peak of the commodity cycle is behind us.
Monetary policy – Could be a longer pause
The larger discussion is on the next steps of the central banks across the globe. Whether it will be a long pause, policy easing or tightening will largely depend on the prevailing macro economic factors. But the dichotomy in the behavior of the short end and the long end of the curve is peculiar to the domestic markets. As per Emkay Wealth, the inverted yield curve this is a transient phase. Yields may stay elevated till the policy stance is modified further during the course of the year, and also based on the liquidity conditions. Late 2023 and early 2024 may see a moderation in money market yields.
Inflation – Moderating but…
The inflation in the US, as well as India, is moderating. What is to be seen is whether this trend is sustainable. The adverse impact of El Nino may push up prices, especially food prices. A reverse spike in the inflation data may delay the easing cycle and may force the US Fed to hike prices as the focus is clearly on controlling inflation.
Outlook
Prices have started falling for most commodities including energy on the back of a sluggishness in growth. Global growth is expected to bottom out in 2023 at 2.8% and rebound to 3% in 2024. Back in India, the monsoon worries due to the El Nino effect cannot be ignored. But the good part is the private capex that has started to look up and is positive for the economy. Though Indian markets continue to be fairly valued zone relative to global valuations, the FII are buying into Indian markets as it stands out strongly among growing economies. Domestic investors too continue to pour money into Indian equities. Strong India growth can support higher valuations in the medium term. The corporate commentary/ tax collections and consumer data indicate good growth in FY24.
Gold
The prospects for investment in gold are pretty bright. A mild recession and weaker equity earnings in the US are positive for gold. The Chinese economic growth on a positive trend is good for consumer demand for gold. The USD peaking out is good for gold with good positive returns 12 months after peaking. The tailwinds for the INR are always positive for domestic prices of gold. Any escalation of geopolitical tension may create an uncertain global macroeconomic situation and thereby push up gold prices.
Speaking at the media round table, Dr. Joseph K Thomas, Head of Research, Emkay Wealth Management said, We are at a critical juncture as far as the equity market and investments are concerned, largely we believe that there will be limited implications of international developments on the Indian markets, barring a spike in crude oil prices. In the recent past Indian markets have shown little to no implications of the movements in the US equities. We expect a lower double-digit growth for the Indian market in FY24 provided there are no major negative surprises.
Ashish Ranawade, Head of Products, Emkay Wealth Management said, Asset allocation is always the key to generating steady returns, among the various asset classes we are seeing a lot of traction & opportunities in the small-cap space in India and also the manufacturing and consumer focused companies are expected to do well in the next few years due to favorable government policies and favourable demographics at play.
Parag Morey, Head of Sales, Emkay Wealth Management said that the company has assets under the distribution of over Rs 2,118 crore as of May 31, 2023, and that the company has operations across the country with branches in 10 key cities. With strong tailwinds and the efforts of the past 5 years, the company is aspiring to reach an AUM of Rs 10,000 crore in the next 3-5 years.
About Emkay Wealth Management
Emkay Wealth Management is a unit of Emkay Global Financial Services. The company is headquartered in Mumbai with a diverse clientele and offers services in the areas of Risk Analysis, Asset Allocation, Investment Solutions, Asset Management, Research & Execution, Investment Processes, and Estate & Succession Planning.
About Emkay Global Financial Services Limited
Emkay Global Financial Services Ltd., headquartered in Mumbai, India, is an integrated securities firm offering a wide range of investment avenues including investment banking, institutional broking, private wealth management, asset management, and financial products distribution. Its institutional broking division services clients across all-important global geographies and its research has received recognition from important bodies including Thomson Reuters, Institutional Investors, Asiamoney, and The Wall Street Journal amongst others, over the years.
