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Capital goods and automotive sector poised for further growth after strong Q4 2024 results, says this investment expert

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“The capital goods and auto sector posted solid gains in March FY24 and are expected to maintain their growth momentum in the coming quarters,” Vipul Bhowar, director, listed investments, Waterfield Advisors, told Moneycontrol in an interview.

He believes that the automotive industry is growing and thriving, especially in the automotive segment. “With strong growth in SUVs, EVs and two-wheelers, and the continued popularity of SUVs offering higher margins to automakers, the sector is poised for success,” said Bhowar, who has over 15 years of experience in research and investment strategies .

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What sectors are you looking to target, especially after the March quarter and FY24 results?

Capital goods and automotive posted solid gains and are expected to maintain their growth momentum in the coming quarters. FMCG and Metals companies also showed signs of earnings revival.

Do you expect the rally to continue in the current financial year?

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The automotive industry is not only growing, but also flourishing. With strong growth in SUVs, electric vehicles and two-wheelers, and the continued popularity of SUVs offering higher margins to automakers, the sector is poised for success.

The rapid development of the electric vehicle (EV) market, the launch of several new hybrid and electric cars, and the significant share of this sector in total car exports in 2022–2023 indicate a promising future for the industry.

Do you see Indian equity markets trading at high valuations compared to history and bond yields?

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Historically, there is a negative correlation between Indian stock valuations and US bond yields. When US bond yields rise, investing in Indian equities becomes less attractive, FPIs become net sellers and many contracts are entered into on P/E.

While Indian stocks may be trading at high prices, it is important to remember that markets are forward-looking. They assumed that the current economic recovery would continue, which shows their resilience and growth potential. This should instill a strong sense of confidence among investors, reassuring them of the stability and potential of Indian equity markets.

Do you expect any major problems for the stock markets that may bring a significant correction in the short term?

While factors such as falling interest rates, mild inflation and the potential positive impact of events such as elections on consumption and investment activity are seen as supporting the market, it is extremely important to be aware of the potential risks.

Any change in these factors, such as a sudden increase in inflation or a change in government policy, could significantly impact valuations and cause short-term adjustments.

Do you think the IT sector should be added to the portfolio now?

The IT sector is currently in the same phase that US technology companies went through last year, with slow growth, so the focus is on reducing costs and maintaining margins. The sector is undergoing shallow cyclicality.

While it may be beaten at the moment, its resilience, growth potential and continued technological advancements make it a favorable choice for investors looking to diversify their portfolios into a sector that shows promise and potential for the future.

Are you optimistic about insurance?

The Indian insurance market is forecast to be the fastest growing insurance sector among the G20 countries in the next five years. The growth is driven primarily by favorable government policies, rising incomes and growing financial awareness among the middle class. These factors have led to increased competitiveness, innovation and new product offerings, positioning India as one of the fastest growing insurance markets in the world.

The insurance industry was mainly dominated by offline channels such as corporate agents, offline brokers or banks. Today, rapid digitalization, product innovation and progressive regulatory policies have enabled consumers to purchase insurance through multiple distribution channels with a single click.

Low penetration, rapid digitalization and growing financial awareness are the reasons why it is worth investing in insurance.

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