Anand Shah says global cues restricting market rally; near-term outlook 'muddled'

The Indian market has been navigating through a complex set of challenges and opportunities, influenced by both domestic and global factors. According to Anand Shah, Head-PMS and AIF Investments at ICICI Prudential Asset Management Company (ICICI Pru AMC), the near-term outlook is 'muddled' and there is a need for caution in this volatile environment.

Shah noted that the Indian market didn't receive much backing from global markets during its recent rally. This comes as the market is keenly anticipating upcoming election results, adding another layer of uncertainty.

Shah is particularly cautious about the valuations of companies entering the IPO market and emphasised that each IPO should be evaluated on its own merits. He urged investors to be careful about the price they are willing to pay.

According to Shah, it's a foregone conclusion that India needs more housing. He believes the real estate cycle will be sustained if prices remain benign. A robust real estate market could have a ripple effect, benefiting sectors across the board.

“It has its own virtuous cycle; it is one of the largest employers in that sense and its all-pervasive impact on various industries. So, there are many sectors which will benefit as real estate picks up,” he said.

In the third quarter of 2023, the Indian residential real estate market achieved an unprecedented milestone in terms of housing sales, as reported by ANAROCK, a prominent real estate consultancy. This surge in housing transactions occurred in the top seven cities of India, despite the typically sluggish monsoon season, and can be partially attributed to the central bank's decision to maintain the repo rate at its current level.

During this period, home sales in these major urban centres reached a remarkable 120,280 units, signifying a substantial increase when compared to the 88,230 units sold in the same months of 2022, representing an impressive growth rate of 36%.

Shah observed a sharp volume improvement in the auto sector but also noted an artificial slowdown due to semiconductor issues. He remains cautious on autos, particularly as interest rates and oil prices remain elevated. Additionally, the transition from internal combustion engines (ICE) to electric vehicles (EVs) poses another challenge for the sector.

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Shah highlighted that pharmaceutical companies possess different business models, making their performance non-homogenous. He also mentioned that pricing pressure on US generics seems to have subsided, offering some relief to the sector.

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