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There could be volatility, consolidation in the market this year: Vinit Sambre of DSP Mutual Fund


The market is grappling with many uncertainties. liquidity, rate hikes, inflation, growth… investors are looking for answers to all these issues. Shivani Bazaz of ETMutualFunds reached out to Vinit Sambre, Head – Equities at DSP Investment Managers. Sambre, who has dealt with the stock market for a long time, believes that investors should use the opportunity to build a sizeable corps.
Edited interview.


The market is at the crossroads in the new year. Lots of volatility as the market looks for firm cues. How do you view the trend?
The markets are witnessing a softening of valuation multiples and an improvement in earnings and the economy. This convergence of valuations coming down and earnings and economy normalizing are likely to persist. A number of sectors and segments with a lot of froth built up is getting normalized. This trend is likely to continue for some more time and corrections and consolidation will throw excellent opportunities during the course of 2022.

Rate tightening cycle globally was expected to be another negative for the market. However, the resurgence of covid added to the confusion. Will RBI hold rates for a while?
RBI has already begun reducing the excess liquidity by the use of VRRRs (variable rate reverse repo). As for rates, it may wait for the union budget and inflation trajectory in the new financial year. The RBI’s monetary policy stance is still accommodative and we expect RBI to gradually normalize monetary policy but without any sudden changes.

Do you share the view that corporate results would keep the market happy? What has worked for the companies in a challenging phase?
Cost rationalization and then a strong pent up demand driven environment boosted corporate profitability. Now a gradual improvement in the economy will support sectors where topline trends are healthy. We expect this to keep corporate profitability decently strong although there could be some slowdown in the pace at which this improvement occurs due to base effects and fragmented nature of economic recovery.

As a fund manager do you still find value in the market? What are you buying these days?
The market always offers different opportunities. There are part of markets which are ignored at the expense of what is performing now. Certain sectors with long term trend appears attractive when there is a market wide correction. We see opportunities emerging in consumer durables, industrial goods and parts of BFSI segment.

Investors continue to be bullish on mid and small cap segments. As someone who dealt with these stocks for a long time, what is your reading?
We have always maintained a strong positive view for the mid and small cap category, only caveat being the investment horizon has to be really long term, let’s say 7-10 years. With the economy improving, this segment tends to do well over time. We would be wary of giving a one-year view as valuations look rich and some macro risks are emerging like inflation, among others. Our long-term view has not changed, we believe there are ample opportunities available to invest in good quality businesses which have a long runway available for growth and are operating in a capital efficient manner.

Many investors are betting on small caps mainly because of the spectacular returns offered by them. What would you tell these investors?
To some extent, there is merit in reallocating some parts of your exposure from the small caps particularly to the midcaps and large caps as we have seen a significant amount of rally in small caps. There is a bit of a speculative element also which has led to some froth getting accumulated. Keeping your investment horizon fairly long and not be driven by very short term moves is the best strategy though.

What should be the investment strategy of investors this year – for both the seasoned and new entrants to the market.
The best strategy would be to stay invested and continue to allocate in a systematic manner. This year could present lot of volatility and consolidation. From an investor’s perspective, this could be a good time to build a sizeable corpus for wealth creation over the long term.



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