B Gopkumar, managing director and chief government officer of Axis Asset Administration Firm, says that the 15-25 per cent correction in frontline indices between October 2024 and February 2025 has made home market valuations extra ‘affordable’. In an interview with Hitesh Vyas, Gopkumar, who manages property price Rs 3.32 lakh crore, says that at a progress fee of 6-6.5 per cent, India stays the fastest-growing economic system amongst main world economies. He expects personal capex to choose up from the second quarter of the present fiscal 12 months. Edited excerpts:
At any time when conflicts come up, equities usually react negatively. Nonetheless, as soon as the battle subsides, markets have a tendency to reply positively. This sample was evident final week. Traditionally, markets have proven a swift restoration from such conflicts inside a short while body.
India’s sturdy macroeconomic framework positions it effectively throughout these occasions. With higher phrases of commerce in comparison with different nations, a decrease present account and financial deficit, diminished crude oil costs, and a consumption-driven economic system, India stays resilient.
Trying on the present market state of affairs, from the lows noticed across the finish of February 2025, equities have impressively recouped roughly three-fourths of their losses. Mid- and small-caps have surged by 19-20 per cent since February 2025, whereas the Nifty 50 has climbed 13 per cent. The 15-25 per cent correction in frontline indices from October 2024 to February 2025 has rendered valuations extra affordable. Prior to now two months, we’ve got witnessed inflows from International Institutional Traders (FIIs), whereas Home Institutional Traders (DIIs) have continued to lend their help.
What’s your outlook for the markets going ahead? What are the important thing dangers that would impression the motion?
There are two to a few issues. One is the worldwide points by way of tariffs. There may be nonetheless an absence of readability on the way it will pan out and what can be the impression on India. There are theories saying that it could not have a significant impression as our exports to the US will not be very excessive. Pharma and IT are among the areas the place we have to wait and watch.
Even corporates within the US are in a wait-and-watch mode as they’re nonetheless analysing the impression of tariffs on their total margins and the way a lot they will go on to end-users. We have to look ahead to the positive print of the bilateral commerce settlement (BTA) between India and the US. The UK-India BTA, which was signed a couple of days earlier, was a lot broader and clearer.
Two, the geopolitical tensions which can be taking place. The third essential factor is the company earnings. The company earnings haven’t been nice for the final 4 quarters. Even for the final quarter (Q3 FY25), the earnings progress estimate for Nifty firms was mid-teen double-digit progress, however we ended with a better single-digit quantity.
Within the first quarter (Q1 FY25), folks didn’t imagine the (earnings) quantity, however within the second quarter, actuality struck everybody. I’m of the view that markets react to company earnings.
When do you see a restoration in company earnings?
We do imagine that from the second quarter (Q2 FY26) onward, a revival within the economic system ought to occur in a greater method as liquidity within the system is excellent and the power of banks to lend is now sooner.
In Q1, we’re seeing stress, and markets are additionally going to stay very unstable resulting from elements equivalent to tariffs, geopolitical points and weak company earnings. We additionally must see how the monsoon shapes up. Final 12 months we had an incredible monsoon, and the agricultural output was as per the expectations. The agricultural economic system is doing pretty effectively. City consumption goes via a cycle, however we see pockets of progress. Actual property is one factor that may be a proxy to the city economic system, and it’s doing effectively after a three-year lull. When actual property does effectively, the economic system does effectively.
General, what’s your view on the present market valuation? Do you see it pretty valued or excessively valued?
Submit the latest correction within the markets, we see valuations to be truthful. I believe there’s nonetheless room for enchancment within the pockets of sectors. One mustn’t take a look at the valuation from a Nifty perspective, but in addition think about from a stock-specific viewpoint. Some shares that have been buying and selling at 80-90 occasions, have considerably corrected, and at the moment are beneath 40 occasions. There is no such thing as a change within the enterprise mannequin, however underlying economic system numbers have modified, and therefore, the valuations have modified.
What’s your evaluation of the economic system and rates of interest going ahead?
I believe you continue to have progress at 6-6.5 per cent. There can nonetheless be a debate on whether or not a 6-6.5 per cent progress fee is nice for the scale of our economic system or not. Nonetheless, once you examine with different world economies, I believe India is the quickest rising…there isn’t any debate on that.
There’s a big quantity of liquidity within the system. The brand new RBI regime has ensured ample liquidity within the system. I believe rates of interest ought to have a downward development from right here on, which is useful for the economic system. Decrease rates of interest may show good for property like equities.
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Given the uncertainty round tariffs and different geopolitical tensions, when do you count on personal capex to choose up?
My view is that it’d choose up from the second quarter (Q2 FY26) onward. With this sort of uncertainty, I don’t suppose firms will begin investing. Practically 80-85 per cent of the flows into mounted earnings schemes are from giant corporates. It is a proxy to know the capex cycle. When the capex cycle comes off, you typically don’t see cash flowing into fixed-income merchandise.
How do you view large-, mid- and small-cap shares?
When contemplating areas of consolation out there, it’s important to match giant, mid, and small caps. Presently, there’s a sense that valuation consolation stays in large-cap shares. When the market undergoes corrections, cash tends to move based mostly on valuation views, and we’re considerably extra inclined in the direction of large-caps in the intervening time.
Nonetheless, we additionally recognise that there are alternatives in midcaps. On the small-cap aspect, we handle the fifth-largest small-cap fund, with property totaling almost Rs 24,000 crore. Our liquidity profile for small caps, which is reported month-to-month, exhibits that we’re among the many most liquid by way of exits for giant property beneath administration (AUM).
What’s your recommendation to retail buyers?
Markets will undergo cycles. If one needs to create wealth, you will need to do asset allocation. So long as one has a diversified asset allocation, it’s anticipated to work effectively. One’s means to carry long-term can also be an essential issue.
How do you view the IPO market in 2025?
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There are lots of (IPO) mandates, however they’re searching for increased valuations, and the market will not be conducive to giving that valuation. Loads of firms have now stated that they won’t go to public markets however as an alternative elevate cash via personal fairness. Submit the second half of the present fiscal, issues ought to enhance. You will note a few IPOs coming in from the second quarter onward as a result of there will likely be stability in India’s in addition to world financial elements.
Within the March quarter, DIIs surpassed FIIs in possession of Indian firms. How do you see this development taking part in out going ahead?
For those who take a look at the fourth quarter (of FY25), a lot of the mutual funds have been sitting on big money. The typical money holding in among the fund homes was not less than 12-13 per cent. We needed to wait and look ahead to February and March by way of taking bigger bets. Now, the money ranges are a lot decrease as we’re seeing funds getting deployed. This is likely one of the the explanation why you see DIIs’ participation going up.
FII flows are a operate of the rupee-dollar equation and the motion of US yields. So long as that’s steady, you could discover FII flows coming in. The flight of cash went off when the rupee was at 86.5. Now, FII flows have began coming in as a result of the greenback has corrected. This development might proceed as a result of DII flows are good.
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The place are the contemporary inflows being deployed by the mutual fund trade?
First, one must be very near the index as index weightage is essential. Then we have to determine the chubby and the underweight. Presently, a lot of the allocations are going to the monetary providers. Other than the monetary providers sector, inflows are seen within the shopper discretionary and manufacturing sectors.
What’s the whole AUM?
Our whole AUM is near Rs 3,32,000 crore as on Could 8, 2025. Of which, fairness AUM is round Rs 2,00,000 crore and the stability is mounted earnings. We’re the sixth largest within the fairness fund and stuck earnings segments. General, we’re the eighth largest AMC by way of AUM.