Speaker: Mr. Anup Maheshwari
Designation: Chief Investment Officer-Equities, DSP BlackRock Investment Managers Pvt. Ltd.
Q.1 View on Equity Markets touching all time high (00:13)
Ans - Peaks and sort of corrections are part and parcel of the market in terms of the way it behaves. There is always inherent volatility in equity markets. At the end of the day as long as investors stay patient through all these cycles, equities deliver very good returns eventually. So the key rather than focusing on where the market is going on in the short-term, I think key is to take a view on asset class itself and which part of cycle we are in. So the way we see things right now is when the early phases of earnings expansion. Valuations are mixed at the moment. We do think over the 5-10 year period, equity continues to be the asset class of choice relative to other options available to investors.
Q.2 View on Quarter 2 Earnings Result (00:55)
Ans - Earnings turning out to be slightly better. It is of course we see earnings in the context of recent events like GST. So you don’t necessarily get the exact perfect true picture of earnings. I think the worst of these two activities of demonetization and GST, the initial confusion is behind us. And we do expect earnings to start improving from here partly because of low base and heading to next year, we will see lot of cyclical sectors beginning to perform better.
Q.3 The impact of rating upgrade and rise in ease of doing business ranking on equity markets? (01:28)
Ans - These are all good things in directionally. It’s always good when we get a rating upgrade, it allows more fixed income money to come in. Similarly, ease of doing business through time will bring in hopefully more foreign direct investment and improve the climate of investing within the country as well. But finally again having said all of that what really drives markets eventually is corporate earnings and all of these if they effectively facilitate future corporate earnings, then they are very positive. These are good trends to have that will promote more investment throughout the country.
Q.4 Sectors that you would want to avoid? (02:06)
Ans - All sectors go through certain cycles. So there are some parts of the market that are at very high P/E, much higher valuations than they ever been in the past where lot of expectations are already factored in. So that’s the area that will be slightly more cautious on. Similarly, in the mid-cap, small-cap segments, there are some companies that are trading very expensive. So that’s another area which is going to be a bit careful of. But I think the broader market looks fine. Enough opportunities on the other side to pick and choose from where earnings cycle is improving. So there is no sector per say that we would totally avoid at any point in time.
Q.5 Possible headwinds globally as well as locally? (02:46)
Ans - I think there is lot of optimism not just in India but in global equity markets expecting a strong recovery. Along with that interest rates also likely to rise globally. So the key is to see how this economic recovery comes about versus at the same time central banks which have been pushing liquidity into markets for last 7-8 years, as they start withdrawing liquidity. So key is to see whether the economic improvement continues as central banks withdraw from the market. That’s the key metric at least globally that we are trying to focus on. Locally I would say we got whole bunch of elections coming up and people like to see continuation of policy reforms, government etc. So that’s perhaps a local risk that we have to evaluate as time passes. But apart from that, we are pretty comfortable with most aspects of the market.
Q.6 Your advice to the investors? (03:43)
Ans - Stay invested. Equity is through multiple years. It will go through bad times. It will go through good times. But eventually as long as corporates create earnings and Indian corporates know how to create shareholder value. There is lot of scalability in businesses in India. And therefore just staying the course and not worrying about medium term adjustments in the market I think is always advice. I would caution investors on one thing which is the inherent volatility of our markets in India should normally be around 25% which means that’s the range of how much markets can move within the year. Having said that volatility today is unusually low and therefore, you know people perhaps new investors in the market might be more under impression that this a very comfortable asset class which is moving up steadily without offering much risk. But that’s not the case. Equities have inherent risk of volatility embedded in them for which you will earn high returns also through time. So the key is to just make sure that you believe in asset class through good times, bad times and keep participating in the market because eventually you know one good bull cycle is enough to cover up for all your investments of the past. So just keep invested and don’t worry about short-term adjustments or volatility in the market.