• Market bottom: Azeez sees 90% odds that markets are near a bottom, unless new news emerges; after falling to almost 22,100, Nifty is at 22,700 and he welcomes the consolidation. He noted small-cap earnings estimates of 27% for the year, 37% in the first quarter and median earnings of about 18%.
• Domestic liquidity: He estimated domestic investors could receive about 7,32,000 crore in inflows over the next 1 year, plus or minus 10 to 12%, and mutual funds held 1,89,000 crores in cash. He is monitoring the cash balance in case redemptions begin after 61 consecutive months of inflows.
• Small-cap flows: Small-cap funds received 9,500 crores out of 38,000 crores in active-fund flows last month, while total inflows including index funds and ETFs were 50,936 crores. He said allocations have become a little skewed over the last 2 months and that overvalued portfolios should be rebalanced.
• Sector positioning: He sees NIFTY IT as having the potential to beat Nifty by 3 to 4%, and prefers railway PSUs over defence as a potential sector-level bet. He favors sector choices over adding further stock-level bets, citing 62% dispersion between sectoral indices.
• Global risks: He warned that the AI-related rally in KOSPI could reverse if driven by a short gamma squeeze, and said he would not be excited about Korea unless it bottoms and languishes for a year. His key market risk is US yields reaching 6 or 7%, which he assigned a 10, 20% probability.