In August this year, Kotak Alternate Asset Managers appointed Jitendra Gohil as Chief Investment Strategist for its Investment Advisory Business. Gohil, with around two decades of experience in Equity Strategy and Business Development,  had earlier worked as Director & Head of Equity Research at Credit Suisse Private Banking and Wealth Management for 13 years. Excerpts from his interview:

What should one watch out for or  avoid doing in this equity bull run ?

Investors should consider exiting and booking profits in mid- and small-cap companies with limited free-float and significant recent valuation expansion, as many are trading at exuberant valuations. Additionally, investors should reduce leverage and adopt a long-term investment approach.

 Where do you see the benchmark market indices (Nifty & Sensex ) moving in 2024?

One year from now, the market will begin factoring in the March 2026E consensus EPS, currently estimated at approximately ₹1,200 for the Nifty Index. We believe the Indian economy could post further upside surprises, leading to resilient earnings or even minor upgrades. Considering the peak in the interest rate cycle, a favourable commodity price environment, and India’s relative attractiveness, we expect the 12-month forward PE to remain around 19x for the Nifty Index. Consequently, we anticipate the market could deliver moderate returns of about high single-digit over the next twelve months, with returns concentrated primarily in the first half of CY 2024.

What is your outlook for large caps in 2024?

Large caps have delivered about 14 per cent return YTD, while the mid-caps have delivered over 40 per cent returns. We now believe the risk-reward ratio is tilted towards the large caps in the near term. As discussed earlier, large-caps can deliver moderate return of high single digit in FY24 in our view.

How do you see the US Fed decision on rate cuts impacting Indian equities in 2024?

This is positive for the emerging markets. India’s weight in the MSCI EM index has doubled to over 16 per cent compared to pre-Covid levels and FPI holding of BSE 500 is at a decadal low. However, we do believe that the market is bit too aggressive in forecasting rate cuts by the Fed. 

Are we seeing a return to golden era for Indian economy as seen between 2003 and 2007?

No.  2003 to 2007 was a different scenario altogether where the world GDP growth was significantly higher and countries were showing synchronised growth. However, this time around China is slowing down materially, while the US and India are surprising on the upside. We are in the midst of heightened geopolitical tensions while during 2003 to 2007, globalisation was thriving.

Do you think gold will still outshine Nifty 50 in 2024 as well?

The US dollar appears overvalued compared to the underlying fundamentals of the US economy. Debt has skyrocketed, and the debt-to-GDP ratio could significantly increase from its already elevated level of approximately 120 per cent. Moreover, the US fiscal deficit ratio has doubled over the past four quarters, reaching around eight per cent, while interest costs are rising. As a result, gold could be a valuable portfolio addition, with a recommended weight of 5-10 per cent.

How do you see India’s inclusion in JP Morgan bond index impacting equities in 2024?

This is a double-edged sword, initially the JP Morgan bond index addition can bring about $22 billion inflows into the debt market. However, in future we will have to maintain good fiscal discipline as during challenging times we might face more outflows as well.

What is your views on FPIs, do you see them now flocking towards Indian market and why?

India’s political stability may lead to a lower political risk premium, thereby improving investor comfort with the country’s overall growth outlook. We will also watch out for the slowdown in China and its impact on global flows.

Mutual Funds are launching hybrid funds, should one invest in these hybrid funds and why?

We have a robust advisory process and would like to keep the asset allocation decision with us. However, for the retail investors this makes a lot of sense as they may help to optimise asset allocation decision by the experts.