Breaking down the market’s movement, Jain said that about 8% of the fall is due to slower earnings growth, while 16-17% is attributed to PE de-rating. “The market’s PE was around 24 times in September 2024, and it has now corrected to 20 times. Historically, the 10-year average stands at 18 times, so further correction is possible,” he said.
Despite the broader index decline, many individual stocks have fallen 30-50%, creating selective opportunities. Jain said that sectors like capital goods, which were trading at high valuations of 40-60 times earnings, have now become less expensive, although they are still above historical levels.
Jain sees strong potential in small-ticket consumption and manufacturing stocks, particularly in segments that have suffered steep corrections despite having stable management and long-term growth potential. “Some of these companies have been around for many years and remain fundamentally strong. Their recent decline presents a good buying opportunity,” he said.
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The manufacturing sector also holds promise, with geopolitical factors driving demand for industries like textiles, chemicals, and casting and forging companies. While capital goods stocks have become more reasonably priced, Jain believes they are not yet at an attractive valuation but could be promising for long-term investors.
Jain explained that the fund is actively buying stocks where earnings remain stable despite the market slowdown. “Wherever earnings have held steady, we are going ahead and buying,” he stated. The strategy includes increasing investments in existing holdings that have become cheaper and selectively adding new stocks that were previously too expensive.
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Among sectors that look more attractive, Jain mentioned industrial names within capital goods, healthcare, and consumption-related stocks. He believes that while capital expenditure (CapEx) has been the main growth driver in recent years, consumption is now gaining importance, making consumer-focused stocks more appealing.
Discussing the impact of new competition in the cables and wires industry, Jain said that growing sectors inevitably attract new players. While this can disrupt sentiment and lead to short-term stock corrections, he remains optimistic about long-term growth. “If India has to grow, we need a lot of CapEx in transmission, power generation, and distribution. This ensures continued demand for these companies,” he explained.
For the entire interview, watch the accompanying video
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