The week that went by saw the unfolding of various events in the Indian and global markets, which, took the volatility in Indian equity markets a notch higher. The fund managers of Smart Portfolios continued to actively implement their individual investing strategies, in order to enhance their respective net worth.
However, owing to the steep fall on Thursday, the fund managers’ net worth has now dropped below the Rs 10,00,000 threshold. Alex Mathews’s net worth is at Rs 9,89,000, down 1.1 per cent; Mehraboon Irani’s net worth stands at Rs 9,75,000, down 2.5 per cent; while Rikesh Parikh’s net worth totals Rs 9,90,000, down one per cent.
Continuing the series of interviews, Shilpa Johnson spoke to Ashish Mittal, Fund Manager-PMS, Centrum Wealth, on his unique ways of coping with the markets in such turbulent times. Having made 46 transactions so far, Mittal’s net worth has declined 1.2 per cent and totals Rs 9,88,000.
According to Mittal, volatility in the markets by itself does not convey anything. “In the last one year, many stocks have been severely punished and are now available at decent valuations, which make these attractive for investments. The broad market indices are at the July-September 2007 levels, while there has been a vertical shift in the macro factors in the economy. India’s GDP at current market prices is up by 99 per cent and the Sensex earnings are up by about 40 per cent. Thus, the current volatility offers opportunity for making long-term investments.”
You are focusing on ‘thematic stock ideas’. Would you elaborate on that point? Perhaps, enlist an instance or two that you have encountered since the start of the season, if any?
Thematic investment ideas are driven by the emergence of structural opportunities. For instance, we find immense opportunities in private banking and especially in the Old Private Sector Banks (OPSBs) space. Recently, RBI had issued guidelines for grant of new banking licences with stringent conditions, including the presence of one-fourth of branches in villages with a population of less than 10,000. We feel OPSBs can emerge as a major theme, given their legacy of doing banking in rural areas, established franchise and, importantly, no identifiable promoters, which makes them attractive as potential takeover targets. Even otherwise, these banks are available at attractive valuations after the recent fall.
RBI hiked interest rates by 25bps in the past week and that led to considerable movements in rate-sensitive sectors. Did that impact your investing strategy in any way? How did you use it to your advantage?
The recent hike has only strengthened our conviction that interest rates in the system may have peaked out. There are no structural problems in the system like war or drought and, with good monsoons, the inflation rate is expected to taper soon. Therefore, we have become buyers in the auto sector and the banking space. Within the auto sector, we are focusing on companies which have outperformed despite a steep rise in interest rates. Bajaj Auto (one of our top picks) is a case in point. From the banking space, we like HDFC Bank and YES Bank, which make for compelling investments, as their asset quality is very impressive.
Is there a piece of advice you would like to share with our readers, given the status-quo of the market?
Investors should understand how the Griffin Paradox (which says demand is low at cheap prices and high at higher prices) plays out in the market against the theory of the Law of Demand. India is set to remain the second fastest growing major economy in the world, despite global economic concerns. Further, with several macroeconomic indicators like banking credit and exports growth remaining robust, a successful monsoon (with four per cent surplus), a service sector (which accounts for around 65 per cent of total GDP) maintaining 10 per cent year-on-year growth and renewed focus by government on policy reforms would provide us a lot of comfort. Valuations of the market, therefore, remain very attractive. We advise investors to choose value picks, high dividend yield & cash-rich stocks with good corporate governance.
For more details on Smart Portfolios visit www.smartinvestor.in/sp
