Mirae Asset Mutual Fund is slightly underweight on power and industrial stocks despite strong order inflows because valuations already factor in much of the growth expected from the sector, Ankit Jain, senior fund manager at the fund house, said in an interview with CNBC-TV18.
Jain said the near-term outlook for these companies remained strong, supported by healthy order inflows. However, he cautioned that potential delays in global AI-related investments and capital expenditure could affect the sustainability of the current momentum.
Over the next couple of years, the outlook for most companies looks very strong because of the healthy order inflows. However, valuations also need to factor in these expectations, and I think a lot of the anticipated growth is already priced in.ANKIT JAIN, SENIOR FUND MANAGER AT MIRAE ASSET MUTUAL FUND
Jain said a correction could make some power and industrial stocks attractive again, given the strong business outlook.
Strong order inflows support near-term outlook
Power and industrial companies have benefited from strong ordering activity. A demand-supply mismatch has also helped them maintain margins despite significant pressure from commodity costs, Jain said.
However, he said investors needed to watch how long the current ordering momentum would last. Delays in global AI-related investments and capital expenditure could affect the pace of demand over time.
Crude oil prices, inflation weigh on market sentiment
Jain attributed the broader market decline to three key headwinds: crude oil prices remaining above $110, rising inflation and interest rates, and the El Niño affecting the monsoon and, consequently, inflation.
Technical factors could add to the pressure, he said, pointing to liquidity being absorbed by initial public offerings (IPOs).
Despite the market weakness, Jain said the overall macroeconomic environment and corporate earnings had been reasonably supportive. Earnings growth expectations for the quarter were around 20% or higher at the beginning of the period.
Results across sectors, including financials, banks and information technology, had been reassuring despite relatively muted expectations going into the earnings season.
Based on what we have seen across sectors so far, including financials, banks and IT, expectations were quite muted. However, the management commentaries have been relatively reassuring.ANKIT JAIN, SENIOR FUND MANAGER AT MIRAE ASSET MUTUAL FUND
He added that market valuations had corrected significantly. From the September 2024 peak, there had been a derating of around 30–35% across the board over the subsequent two years, with large-cap stocks seeing an even sharper decline in valuations.