Ridham Desai, India equity strategist at Morgan Stanley, is of the view that India’s fundamentals made a trough sometime last year and we are at the beginning of a new fundamental cycle now.
“These are long duration cycles that tend to last for 5-7 years, so arguably we are few months into a 5-7 year cycle, in which we should witness pretty strong earnings growth. Corporate revenue growth has already put a trough almost 2 years ago and has been accelerating but profits haven’t. So it won’t surprise me if earnings put in a 20 percent CAGR over next five years,” said Desai in an interview with CNBC-TV18 on Wednesday.
According to Desai, "The market is not oblivious to a new earnings cycle but it cannot price-in a long duration earnings cycle. However, it can look forward 6-9 months and put that into the price. A little bit is already in the price but there is a lot more to come, so it is good time to be engaged in equities"
"Moreover, if the conviction is that India will vote in a majority government then we could be in for a continuing powerful move in the market until the elections", he said.
Talking about various sectors where one could invest, Desai said, "One should buy into domestic cyclicals both consumer and industrials like auto, airlines, hotels, a slew of sectors that are discretionary in nature and industrials cyclicals like engineering, construction companies."The house would also prefer buying financials like select NBFCs and corporate banks that are expected to report strong earnings growth.
The house is also very bullish on real estate, both commercial and residential, said Desai.