Commodity Market on the Cusp of a Supercycle, TRUST Mutual Fund Manager Weighs in

Commodities Super Cycle Possible, Says TRUST Mutual Fund CEO

Sandeep Bagla, the CEO at TRUST Mutual Fund, believes that commodities are in the middle of a super cycle. This trend is driven by a heightened demand for metals, primarily due to the AI cycle and supply disruptions caused by geopolitical upheaval. As a result, metal prices are experiencing short-term bullishness.

However, investing in metals is a tactical play and price volatility can be high. Bagla advises allocating a portion of the portfolio to metals, but warns that ongoing high metal prices will eventually hurt demand and cause demand destruction, which might flatten out the steep price rise over the long term.

Sectoral Outlook

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Bagla is bullish on several sectors, including pharma, healthcare, defense, industrial manufacturing, Energy transition, and EMS companies. He believes that these sectors have a medium to long-term growth runway, driven by upcoming megatrends in the next 5 to 10 years. However, he cautions that the retail investor should remain invested in diversified mutual fund schemes to mitigate volatility.

Earnings Growth and Market Performance

TRUST Mutual Fund expects downward earnings revisions due to oil price shocks and supply constraints across sectors. However, if conflict eases out, earnings growth is expected to resume towards the end of the year. Management commentaries tend to be overly optimistic and may not be reliable when global forces are beyond control.

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Market Bottoming Out

India's market has seen historic underperformance compared to other emerging markets this year. While it is unclear whether markets have bottomed out, TRUST Mutual Fund believes that the earnings cycle is in the process of bottoming out and upgrades can be expected towards the end of the year.

Investment Recommendations

TRUST Mutual Fund recommends investing in sectors with strong growth potential, such as pharma, healthcare, defense, industrial manufacturing, Energy transition, and EMS companies. However, investors should select smartly and have a sufficiently long investment horizon to tide over any intermittent volatility.