In an interview with ETMarkets, Vora said: “Banking and financials are the largest sectors, and these are expected to drive earnings growth as they are in a sweet spot – credit growth is picking up and banks/NBFCs have cleaned up their balance sheets and shored up capital” Edited excerpts:
We have seen some profit-taking from the highs in both Sensex and Nifty. What is fueling the fall – is it the combination of a rise in US Yields and geopolitical concerns?
A 5-10% correction is pretty normal for equities, so I am not really perturbed by the same. It can be attributed to mostly global factors viz. the geopolitical situation in Israel and Ukraine, oil prices remaining high and interest rates in the western world continuing a rising trajectory.
Thus, there are concerns of a global slowdown especially since China is not accelerating growth.
India’s domestic growth continues albeit with a ‘K’ shaped recovery where the rural economy is still a bit below potential growth. So, the fall is more due to global factors.
The next big question is – should one buy the fall or stay put?
There are three components of the process of investment i.e., Buy – Hold – Sell. “Buy” and “Sell” are well understood, but “Hold” is the toughest.
It involves not taking any action but to just keep monitoring the position to check if the initial investment thesis is still valid. This requires a lot of patience.To weather the volatility of the market, you need to continue with the long-term asset allocation decisions that you have made in the past.
The precise purpose of planning in the past was to take care of volatility which will be inevitably seen in the future. So, whether it is your SIP or insurance premium or NPS or EPF contributions, continue with all of them as per plan. Do not try to catch the top or bottom.
Only if you have a surplus beyond the planned commitments, you can increase allocation to equities if there is panic in the market.
After the recent fall how should one play the small & midcap space?
Even the mid and small-cap indices haven’t really seen a meaningful correction.
What does the management commentary suggest from the companies that have come out with September quarter results? If the geopolitical position escalates there could be further pressure on commodity prices?
Overall earnings have been as per expectations so far. IT is slowing down. Banks are doing well in terms of growth while some banks have shown some margin compression. Asset quality remains good.
Commodity companies have shown mixed results and FMCG continues to be weak. We do not see significant upgrades or downgrades to Nifty earnings estimates after all the results are out.
We are approaching Diwali as well and entering the new Samvat year. What were your key learnings from the year gone by?
The year gone by was a great one for stock picking. A wider number of different sub-industries did well, driven by multiple themes. It highlighted the entrepreneurial dynamism of India and the depth of the capital markets.
Another key achievement was the amazing coordination between the Government and RBI to maintain macroeconomic stability – India did extremely well in managing oil prices, currency, inflation, interest rates, and deficits.
My learning has been to not underestimate the capacity of India to chart its own course by not blindly following conventions that may have been ineffective but still recommended by ‘experts’.
Another learning was the exponential effect that our technology, especially in banking and finance has re-shaped the economy and flows to capital markets and the resultant strong support to markets by the retail investor.
Which sectors are likely to hog the limelight till the next Diwali?
I expect the domestic Indian economy to do better than the rest of the world. India will be the fastest-growing large economy for the next few years. So, the preferred sectors are domestic-focused.
Banking and financials are the largest sectors, and these are expected to drive earnings growth as they are in a sweet spot – credit growth is picking up and banks/NBFCs have cleaned up their balance sheets and shored up capital.
Investment-linked sectors and sectors with a strong Government focus to develop are also likely to continue to do well.
These are linked to power (renewable as well as conventional), defence, railways, roads, buildings and other infrastructure, capital goods, construction, and real estate.
Manufacturing companies in segments with production-linked incentives should also continue to do well.
What is your take on the recent IPOs that are hitting the D-Street? Any IPO which you are tracking? Have you made any investments in the recent IPO?
I evaluate IPO companies like any other listed company. Fundamentals and valuations continue to be the reason to buy or avoid IPOs. However, the very recent listings have mostly been in small companies which we find difficult to track due to bandwidth constraints.
How should one spot gems in a falling market?
Do your homework in advance and identify good companies that you would like to have in your portfolio but had missed earlier.
Wait for prices to reach your comfort zone. The one thing to not do is to buy just because some stock is down ‘a lot’. The market rewards patience and always gives more than one chance!
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)