What the market has currently baked in is RBI’s base case of oil at $85 for FY27, inflation moving up to 5%, GDP growth coming down by 50 bps for the year and 1QFY27 earnings taking a hit due to the Gulf situation. If either the Gulf situation prolongs for months or if oil prices remain elevated at $100 or above for much longer, markets will have to factor in a new reality.
Higher oil prices and rising inflation will dent growth in consumer spending, which had picked up momentum in FY26 on the back of a number of Government measures including GST cuts.
Nifty’s fair value basis FY28 earnings projections and 20PE will be in the 26,000 – 28,000 range. There is scope for a decent move up – but not very large, from here on.
Anand has an inward focus in stock selection for the HDFC Value Fund. The power ecosystem – from generation to distribution to EPC to renewables – there are many opportunities he sees in this space as the Government will double down on energy security and self reliance in electricity generation.
CDMO is another space within the healthcare theme thatAnand is very bullish on.
His stock picks fall into 3 categories: absolute value, relative value (GARP) and turnaround stories.
Despite the recent spike in global commodity prices, he continues to be underweight this segment as he believes high commodity prices result in higher inflation and demand destruction, which in turn will bring down commodity prices – this is not a sustainable structural story in his view.
Anand is bullish on large private sector banks – he believes repo rate will be increased in the second half of this FY, which will enable banks to re-price their loan books immediately while deposit rates go up with a lag – thus expanding net interest margins (NIMs).
Moderately high inflation is good for the economy – it spurs nominal GDP growth, supports stronger earnings growth, enables better salary hikes which in turn fuel more consumption – there is a virtuous cycle that can kick in if inflation settles in the 5% range.