Stay Invested For the Long Term
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Please share with us your journey in the Indian capital market.
I started my career in Indian capital markets as a research analyst with SKP securities. There I learned the basics of how to look into a company and evaluate them. After staying there for 3 years I moved to SMIFS Securities as Head – Equity Research, where in I gave more shape to the previous learning of the effect of various cycles in the capital markets, which helped me in making better stock picking. Subsequently, I got involved in the Investment Banking division of the company and executed few QIP/Private Placements which gave me further opportunity to work closely with promoters of various companies. Reading their minds regarding the businesses, goals, challenges and commitment to stakeholders was a remarkable experience. This, along with working with the Fund Managers/CIO of various domestic and foreign funds helped me in knowing how institutions think and react before investing. I was also handling the PMS and proprietary book there. After getting an all round experience of seven years, I decided to move to the BUY side, joining Peerless Funds Management Company for the research division of equity funds under various schemes. A more focused approach was developed over one and a half year with regards to managing funds and was a concern before I stepped in as the Fund Manager in Peerless Funds Management Company.
What has been your investment philosophy?
I follow a Growth at Reasonable Price (GARP) investment style that blends the concept of value and growth. The idea is to identify stocks which would potentially exhibit strong growth; but are available at reasonable / average valuations. GARP model works well for picking stocks with a medium term horizon (1-2 years). The idea is to identify superior businesses with growing and predictable cash flows run by competent management. In terms of stock picking, companies (big or small) having sound management, good corporate governance, strong balance sheet, good execution track record and clear vision will prosper faster. The focus is not restricted to the size of the company rather quality; hence both large-cap and mid-cap companies are looked upon.
What is your take on the current investment climate of the country?
Currently, the environment for investment in India is the most appropriate. The reasons for the positive hope are clearly due to the fact that the policy paralysis, which was there since last few years, in various areas including land, mining and energy to name a few, will find a way to get restored. These areas will now be keenly watched and speedier actions are expected to be taken. We have a stable government, which is expected to pave way for policy reforms leading to mobilisation of logjams in the system and better growth and prosperity for the country. Given the scenario, gradually solutions to these issues are being worked on, growth for Indian corporate is poise to happen. Also, a low base affect will play good for India, wherein any uptick will be substantiated.
What is your outlook on the equity markets for this fiscal?
I feel we are at the start of a multiyear bull market. After the results of recent elections, investor’s confidence on Indian capital markets has increased due to a decisive government after winning by a majority. Recently the stock market rallied due to the huge FII money getting pumped in last two months. However, a lot of foreign investor’s money is still lying on the sidelines along with the domestic money. In last 10 years on an average, FIIs have put in around USD 20 billion in each calendar year (baring a couple of years) in Indian equity market. Till date in the current calendar year, around USD 3 billion has been pumped in Indian equity markets, thereby signalling a lot more to come.
Which are the global cues that you are looking forward for?
US Federal policy regarding tapering of Quantitative Easing (QE), Geo-political disturbances between Iran and Iraq, demand environment in China could be few global events that may be detrimental to the direction and pace of the movement of Indian stock market.
What is your take on the interest rate front?
The scenario will be unpredictable for the next few months as far as interest rate is concerned. This is due to the fact that the impact of El Nino could lead to weak monsoon and disruption in Iran and Iraq leading to higher crude oil prices may lead to uncertain inflationary situation. Having said that, due to the high base affect in the second half of current fiscal, we can see some relief in infl ation, which may help RBI to soft en interest rates.
Do you think that the RBI will move ahead with rate cuts this fiscal?
In my view RBI may cut interest rates in the second half of current fiscal upto 50 basis points. Do you see the GDP of the country reviving any soon and what are the reasons that you attribute for the same? Some ray of hope can be visualised as far as GDP growth rate of India is concerned. However, identification of areas of policy paralysis, framing of policy reforms, implementation of the reforms and its impact to come will take its own time. Having said this, once these are in place, we can see revival in GDP growth rate of India in couple of years.
What is your take on the present valuations of the Indian markets?
Broader index of India Sensex is currently trading at 15.8 and 13.6 times FY15E and FY16E earnings. Though this seems to be reasonable, I feel aft er couple of quarter, earnings estimates are expected to change, making Indian markets more attractive.
What are the triggers that you are looking forward to with regards to the markets?
Probable near term triggers for market could be aggressive budget by the new government, normal monsoons and pace of implementation of policy reforms to be implemented by the new government.
What are the sectors that you are currently betting on, and in which areas should investors take caution?
For our country to grow, industrial growth is a must, for which basic resources needs to be available namely land, water, electricity, basic infrastructure (Roads, railways, ports) along with necessary regulatory clearances (forest, environmental etc) for the projects to takeoff . Visualizing this we see core infrastructure (Roads, railways, ports) and energy will be the focus along with the related areas (Mining, Heavy Engineering, Core Infrastructure developers, building materials). Apart from this in a country like India, in order to mobilise all these, banking will have a very important role to play. As the road blocks for these is expected to be removed and the industrial growth picks up, the Indian consumption story will regain its strength and the growth in sectors related to these will follow. I would suggest that one should be cautious in investing in consumption led story now along with Information Technology (Currency getting stronger).
What advice would you like to give retail investors at this juncture?
Most of the retail investors are usually the late entrants. My suggestion to the retail investors would be better late than never. One should stay invested so that he/she may not feel left out at any point. Investing via Systematic Investment Plan (SIP) mode should become a habit for them. My suggestion would be to invest in a multi-cap fund with balanced approach towards large and mid-cap companies.
VISHAL JAIN
Fund Manager– Equity Funds, Peerless Mutual Fund