Daily Voice | Global recession biggest risk to 7% growth projection for FY25, says Jimeet Modi

Samco Group founder and CEO Jimeet Modi said the market rally would likely continue but there would be a shift — from mid, small and microcaps back to largecaps, as valuations are stretched in certain pockets.

The chartered accountant with more than 15 years of experience in equity research and investment said electric vehicles and semiconductors are the sunrise sectors but a lot of their potential has already priced in.

In an interview to Moneycontrol, Modi said the RBI’s growth target of 7 percent for FY25 could face headwinds if the US economy falls into a recession with ripples felt across the world. Edited excerpts:

What do you make of the recent regulatory actions by the Reserve Bank of India (RBI) against the financial services industry?

The RBI's recent actions against financial services industry and a few NBFCs in particular may create some pain in the short term but in the longer term it is in the right direction because it will essentially improve the lending practices and so on and so forth. The RBI move is in the interest of customers and it shall result in long-term benefits and better health for financial ecosystem.

Do you think the demerger is going to be a game changer for Tata Motors?

The demerger of Tata Motors into commercial vehicles (CVs) and passenger vehicles (PVs) is not going to be a big game changer according to me. Though it is a step in the right direction but today synergies between the two businesses are low and the demerger is going to simplify the structure of the company.

Also read: British American Tobacco said preparing to launch ITC selldown as soon as this week

Do you think emerging sectors such as electric vehicles and  semiconductors (with ancillaries) will dominate investments?

There's no doubt about new emerging sectors like electric vehicles (EVs) and semiconductors are the sunrise sectors and will turnout to be a great businesses but lot of their future potential has actually been priced in.

So, whether they turnout to be great investment or not will depend on valuations, which, at this moment, seem to be slightly stretched as reasonable amount of hope has already been built into prices in these sectors, both in India as well as at the global level.

Which are the big risks the RBI's FY25 growth projection of 7 percent face?

The major headwind to achieve 7 percent economic growth, as perceived by the RBI, is the possibility of a global recession. If we see the serious slow down in the US economy — at this moment it appears to be a likely soft lending — but if the US plunges into a recession, and as a result, the world economy slows down, it can have implications for India as well and the projected growth rate for the domestic economy could be at the risk.

Also read: What is T+0 trade settlement and what are its challenges?

Do you expect a significant rally in Indian bonds in FY25 after recent developments?

Recent developments like inclusion of Indian Bonds in the Bloomberg bond index and it's resultant benefits will take time to accrue as and when it happens. As far as the Indian bond market is concerned, we anticipate a rally in the second half of this calendar year.

We expect interest rates to come down by that period both in the US as well as in India as inflation trends down. However, we don't believe there will be any runaway rally in Indian papers but it will be a gradual uptrend.

Do you expect the bulls' party to continue even though valuations looked stretched?

For long-term bulls, there still exists a value and this market remains a secular bull market with "buy on every dip" strategy to deploy. However, there definitely are certain pockets where valuations are looking stretched and there's no margin of safety available. This is particularly true for mid, small and microcap space.

So, while the rally and overall party may continue, the participants of the party may change to largecaps from the earlier participants like mid, small and microcaps.

How does the new feature in the name of Options BRO in SAMCO Trading App is going to be helpful to traders and is it really safe?

Today 9 out of 10 option traders lose money because of an unsystematic approach to trading options. We have designed this platform called Options BRO to help options traders be more systematic and help them to build their own strategies without having to do a lot of cumbersome work and take a more strategy-based approach to options trading which results in a better outcome.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.