Daily Voice: Here's why Neeraj Chadawar of Axis Securities says FY25 will be an interesting year for markets

Neeraj Chadawar, Head-Fundamental and Quantitative Research at Axis Securities, expects the metals space to remain in focus in FY25. He is positive on non-ferrous metals and expects them to gain from Fed rate cuts, when they come.

A professional with over 14 years of experience, Chadawar expects the Nifty to see a new high in the near term. The broader market may see some time correction in certain pockets and flows will likely shift to largecaps, he told Moneycontrol in an interview. Edited excerpts:

Do you think FY25 will be more interesting for markets than the previous years?

Yes, FY25 will likely be an interesting year for the equity market as multiple events are lined up in 2024, and the market will closely monitor the developments around them. These key events include the general election, the expectation of the Fed rate cut around May-June, the full-year budget around July after the formation of the new government, expectations of interest rates cut by the RBI in sync with a global rate cut and the US election in November.

These events are expected to keep the Indian equity market volatile and it could respond in either direction, based on the developments. In any case, we continue to believe in the long-term growth story of the Indian market.

Also read: Gold hits fresh all-time high. Should you buy, hold or sell?

How do you view the metal space, which has seen good buying interest in the past couple of weeks?

We foresee the metals space remaining in focus in FY25. Specifically, we hold a positive view of non-ferrous metals, as they will have a tailwind from the possible Fed rate cuts from June 2024. We prefer non-ferrous metals over steel, as the demand for them has picked up...  The property sector in China continues to remain under pressure, putting pressure on steel demand.

Are you taking exposure to the real estate space, one of the biggest gainers in FY24?

We saw a good rally in real estate stocks last year after a muted performance in the previous four-five years. The real estate sector is seeing record registrations in metro cities. Demand has picked up, and bookings are being witnessed at most new launches.

The sector may witness more traction going forward as the RBI has already taken an interest rate pause and we are near the peak of the rate hike cycle. Keeping these developments in view, we maintain an equal weight stance in the sector.

Most experts have ruled out an FY24-like rally for the Sensex and the Nifty in FY25? Do you agree?

FY24 was a remarkable year for the Indian equity market, especially the broader market, in which mid and smallcap indices rallied by 60 percent and 63 percent, respectively. In comparison, the largecap Nifty50 went up by 28.6 percent. With a strong catch-up by mid and smallcaps in the last couple of months, we still believe the margin of safety in terms of valuations for these segments at current levels has reduced compared to that available in largecaps.

With this view, the broader market may see some time correction in certain pockets in the near term and flows will likely shift to largecaps. Based on this, we believe the Nifty50 could see a new high in the near term. However, the long-term story of the broader market continues to remain attractive.

The current valuations offering limited scope for further expansion and an increase in corporate earnings will be primary drivers of the market returns moving forward.

Hence, bottom-up stock picking focusing on "growth at a reasonable price" and quality stories would be the key to generating satisfactory returns next year.

Do you think the China equity market is going to be a star performer in FY25?

It will be interesting to see how the Chinese economy picks up in FY25. If the pickup is higher than the street expectation, some emerging market flows will likely shift towards China in the later part of FY25. So, we need to wait and watch and see how the Chinese economy performs in FY25.

What is the most important factor to watch for in the RBI commentary in the April 5 policy meeting?

We do not expect any significant change in the April MPC meeting and expect the RBI to maintain a status quo on rates. Liquidity conditions have eased compared to the previous meeting, so we do not expect any meaningful announcements on the liquidity front.

The equity markets are unlikely to be significantly impacted by this policy. The rate cut cycle could possibly be seen in the latter part of H1FY25.

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.