In an interview with ETMarkets, Bhandwaldar who has over 16 years of experience in Indian equities, said: “smart money should gradually move into Indian equities over next 6-9 months. We have seen good consolidation in market over last one year and the valuation is at reasonable levels from a 2-3-year perspective” Edited excerpts:
After a strong July, where do you see markets for the rest of 2022 and any important data points to track in the coming month?
The market has been volatile for the last few quarters and is likely to be the same for a quarter or two more, given the global macro context and its implications for growth and energy prices.
We see the market gradually consolidating and stabilising as interest rate hikes are done globally.
The data points that one should watch out for in the current context are —
1) Moderation in energy prices,
2) Moderation in global growth, and
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3) Resilience of corporate earnings or lack of it in India.
Growth impact on the macro environment is the most critical factor to watch out for in the coming quarters.
Where do you see the rupee headed in the near future? Any data points that investors should track?
We have to look at INR depreciation in the context of other currencies and not in isolation. In fact, INR has been one of the better-performing currencies over the last 1 year.
Given global risk-off and capital flowing back to the US, most emerging market currencies will suffer depreciation for some time (till inflation corrects itself).
Having said this, we don’t see any macroeconomic instability for India given its strong dollar reserve position as well as low dependence on external debt.
The stable banking sector is added comfort during the current volatile environment. The Risk here is that if energy prices were to sustain at a higher level for a longer period.
Shareholding data seems to suggest that FIIs might be selling but raising stake in some of the midcap companies. What are your views?
The outperformance/underperformance trends across market capitalisation have been mixed for the past 3-6months as well as for the past 2 years.
We would rather look at opportunities across market cap based on underlying earnings growth superiority. Generally, we are more constructive on domestic plays as against global cyclical.
What are your views on auto and realty? Both these sectors rose in double digits so far in July?
This is too short a time frame to make a judgment about any sector. Having said this, we think that cyclically one should expect earnings upgrade in both these and a few other domestic cyclical sectors. Risk remains of a significant domestic growth moderation due to global factors.
What is your take on June quarter earnings which have come so far? Do you see earnings taking a hit in rest of FY23?
Earnings have largely been mixed in the first two weeks of the results season. Sectors like IT have experienced earnings downgrades whereas Banks and Industrials have been healthy as per the published data.
We are getting some Rs15000 cr every month in SIPs. This is an encouraging sign which also signifies that retail investors are now more confident and informed. How do you see this pan out in near future?
Over time, Indian retail investors have realised the importance of equity allocation in a disciplined manner through SIPs. Most retail investors have seen the power of compounding in equities, by being in the market in the past 5-7 years.
Having said that, patience gets tested when one-year rolling returns in equity portfolios become negative. We are in that phase currently.
As far as FIIs are concerned, selling in India was part of global sell-off of EMs and thus it should moderate gradually over next quarter or so.
Where is smart money seems to be moving in the rest of 2022?
Rather than taking calls for the next 6 months, we would encourage investors to look at possibilities for the next 3 years.
When we take this context, we believe that India’s nominal GDP is likely to grow at 10-12% CAGR and in turn corporate earnings are expected to grow at 12-14% CAGR.
Thus, the underlying asset class of equities is likely to compound money in double digit over 3 years, as per our opinion.
Thus, the smart money should gradually move into Indian equities over next 6-9 months. We have seen good consolidation in the market over the last year and the valuation is at reasonable levels from a 2-3-year perspective.
India’s investment cycle is showing nascent signs of revival. Which sectors will benefit the most from the CAPEX recovery?
We see all domestic cyclical like industrials, financials, consumer discretionary including auto, housing value chain, etc to benefit out of this cycle, if these cyclical trends persist over next 2-3 years.
Are there any initiatives you have taken to help investors to make a better investment decision, as well as give them a secure interface to trade?
We do investor education programs to make investors aware of all benefits and risks associated with equities as an asset class
Finally, what is your mantra of picking winners for your portfolio? Is there any specific parameters you see before making buying or a selling decision?
Portfolio success over a period is a combination of good processes and good people. We believe that we have a good investment process that is supported by a robust risk function.
This process is executed by an experienced fund management team, which helps to deliver the outcomes through cycles.
Broadly the focus is on investing in good quality businesses run by capable and upright management and with good balance sheets.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)