Global Risks Fuel Market Drop; Centrum PMS Cites Buying in Banks, Autos, IT
Overview
Manish Jain of Centrum PMS attributes recent market declines, including a ~900 point drop in the Nifty, to global factors like US tariffs and geopolitical uncertainty, rather than domestic weakness. He advises long-term investors to build positions in banks, autos, and large-cap IT stocks, citing stable economic fundamentals and anticipation of improved earnings growth.
Global Factors Drive Market Volatility
Manish Jain, Head of Fund Management at Centrum PMS, stated that the recent substantial fall in the Nifty and broader markets is primarily driven by external global risks, not domestic economic frailties. The Nifty has shed approximately 900 points from its recent peak over the past week, with broader market indices experiencing steeper declines.
Domestic Economy Remains Stable
Jain emphasized that the domestic Indian economy continues to demonstrate stability, supported by consistent GDP growth and positive corporate earnings trends. This resilience contrasts with the volatility attributed to overseas developments, including proposed U.S. tariff legislation and geopolitical tensions in regions such as Venezuela and West Asia.
Investment Opportunities Emerge
For investors with a two- to three-year horizon, Jain recommended against waiting for perfect entry points, stating that market timing is rarely precise. He suggested focusing on sectors poised for improved earnings growth and strong domestic support, specifically naming banks, automobiles, and potentially large-cap Information Technology (IT) stocks.
Key Domestic Drivers
Looking ahead, Jain identified three crucial domestic factors shaping market direction: the stabilization of interest rates after the current cycle, the stabilization of the Indian Rupee near current levels, and critically, sustained earnings growth. Corporate earnings have faced downgrades for four consecutive quarters, with projected growth of around 12% often translating to actuals of 6-7%.
Sector-Specific Outlook
Early indicators for banks this quarter appear stronger, partly due to recent Goods and Services Tax (GST) rate cuts, with sequential increases in reported numbers. The Union Budget, due next month, is also anticipated to be a significant sentiment trigger. Within the IT sector, Jain expressed more optimism for large-cap companies, suggesting their recent earnings guidance cuts and valuation multiple reductions have created opportunities for a potential rotation trade, making them a 'good dark horse' for the year.
