Daily Voice: Power, infra, clean tech among top FY25 themes for this fund manager

As the market awaits RBI’s policy decision on April 5, Ashwini Shami, executive vice-president (EVP) and portfolio manager, OmniScience Capital, expects the Indian central bank to follow the lead of the US Federal Reserve.

The Fed may take a rate cut in May or June, which will likely force the Reserve Bank to take a necessary policy decision, Shami told Moneycontrol in an interview.

For FY25, the fund manager with over two decades of experience is betting big on power, banking, infrastructure, NBFCs and clean tech. Edited excerpts of the interview:

Are staples a good buy? What about their valuations?

The consumer staples sector is still richly priced compared to the growth the sector is offering. The Nifty FMCG index still trades at a P/E multiple of more than 42. With strong economic growth, the disposable income is expected to rise which may support growth for the sector.

However, there are multiple other sectors such as banking, IT, infra and power that are available at much lower valuations for the comparable or better growth rates.

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Do you expect the rural market to outperform during elections?

The run-up to elections typically see higher economic activities in the form of rallies and other campaign-related expenses. Additionally, there may be certain higher direct cash transfers to farmers, which may increase consumption. This could be positive for two-wheeler and automobile manufacturers and FMCG companies in the short run.

However, looking at the massive infrastructure spending by the government on long-term projects that are impacting the overall economy, there is no specific case for the rural market to outperform the overall economy.

Are you bullish on gold, considering the current global environment? Is it time to have more gold in the portfolio?

Interestingly, the gold price has gone up nearly 20 percent in the past six months, broadly in line with Indian and US equities. We believe that as we come closer to interest rate cuts in the US, the risk-reward scenarios tilts favourably towards equities.

Investors may add some gold allocation to their portfolios for stability and to protect purchasing power against inflation. However, to add shine to the portfolio, equities is the way to go.

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Do you think IT earnings bottomed out in the December quarter? Will March numbers signal a clear trend?

The IT (information technology) sector is a long-term growth story. The digital transformation opportunity is very large and the availability of digital talent in India gives the sector a strong competitive edge globally. There are multiple transformative technologies such as cloud, GenAI, metaverse, 5G, etc. that are creating growth opportunities for the IT pack.

We believe the market’s near-term focus on the US interest rate cut and the fears around recession is keeping the IT sector valuations at attractive levels, especially for the largecap IT names.

Do you expect the RBI to cut repo rate in the third quarter of this year? Will the food inflation risk remain for  the rest of 2024?

With strong GDP growth of 8.4 percent in Q3, the central bank is expected to focus more on the inflation, which also has remained within the 2-6 percent target range. We believe that the policy rate action will be driven more by the actions of other central banks, especially that of the US Fed.

There is a reasonable possibility that Fed may take a rate cut in May or June meeting this year and that may force RBI to take necessary policy rate decision. The food inflation has remained at elevated levels but this is more of a supply side issue than the demand side.

Your top themes to bet on for FY25?

Power, banking, infrastructure, NBFCs and clean tech are our top themes for FY25. Power consumption is expected grow in double digits on the back of increased economic activity and the power pack is available at attractive valuations.

Similarly, banking sector is also expected to grow earnings at double digits with strong top line growth and improving RoEs (return on equity). The banking sector balance sheet is strongest in a decade and with peak CRARs (capital-to-risk weighted assets ratio), there is huge capacity to lend to support the private sector capex growth.

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.