Nirali Bhansali, Equity Fund Manager, SAMCO MF

20 Apr 2023 , 01:55 PM

Is this a good time to invest in mutual funds when the markets are highly volatile as global headwinds persist?

People who wait for good times to invest, keep on waiting. Mutual funds have proved to be relatively safer investment products when compared to individual stock picking by public in general, given that mutual funds are constructed in aggregation after considering the individual as well as systematic risks across stocks and sectors. The birth of SIP in mutual funds vis-à-vis lumpsum is to efficiently tide through the volatility in the markets and infact benefit from it. Mutual Funds also offer a variety of category of funds where an individual can invest according to his needs and risk profile. Therefore, mutual funds as an investment vehicle is formed to aid investors to sail through the volatility without any personal biases.

What are your investment strategies to invest in equities?

We primarily focus on investing for the long-term contrary to day trading which is very short-term oriented. Our style revolves more around picking consistent businesses which can stand the test of time and can continue to grow and compound their earnings. Once a stock is identified, we have a certain framework and discipline to buy or sell these stocks. Being disciplined about your approach is very important in investing and therefore, we try to constantly be mindful that if a security can go up 100-200% in a very short span of time, it can even fall that fast, causing harm to an investor’s corpus. This is what keeps us grounded and enables us to manage the risk-return ratio of the portfolio better.

Are you bullish on the market right now?

At present, I believe that markets are in a corrective phase due to the uncertainties in macros. With high interest rates, slowing down of growth globally and heightened inflation, Indian markets may also witness knee-jerk reactions depending on the economic data and decisions by the regulators. However, these instances make for good buying opportunities for a long-term investor. If and when markets present such opportunities in the businesses I would like to buy, I become bullish and accumulate.

What sectors are you bullish and bearish and why?

We are bullish on the FMCG, pharma sectors, monopolistic businesses as they have a long runway of growth given their network effect and asset light business models. We are bearish on the chemical and metal sectors given their recent run-up in valuations and earnings growth already witnessed in the past year and more.

What are your main holdings and have you changed your portfolio recently? Any new entries or exits in your portfolio?

Our main holdings are towards the technology and financial services sectors. Exposure to beaten down stocks from the above sectors gives us a good opportunity of growth from these businesses especially from the current levels. The IT sector underwent acute pain in terms of price correction but on the contrary, it has witnessed continuous robust deal wins, the demand for its services still remains intact despite inflation, attrition seems to have topped out and margin trajectory continues to remain stable. Financial services sector continues to witness demand given our market is highly under-penetrated. This certainly paves the way to achieve scale, a larger client base and higher ticket sized products. India currently is an attractive destination for sale of financial services products. Due to these reasons we continue to retain our conviction in these sectors from a longer-term investment horizon. 

Where do you see more value – Largecaps, Midcaps or Small caps? And what are the reasons for the same?

Value arises not always by market cap but by several other factors. We believe in a bottom-up approach when it comes to stock-picking. Currently, overall markets   seem to bit overvalued but there will always be pockets of opportunities in every market cap stock at any given point in time. Rather than solely focusing on the macros, we consider sectoral tailwinds, fundamentals and valuations of particular stocks to invest in. It is prudent to look for such value opportunities even in high volatility. 

According to you, what are the key downside risks for the Indian markets? 

Certain risks which are specific to India would be a change in stance by the RBI from accommodative to hawkish, further depreciation in currency which impacts our trade deficit, escalating inflation and rise in input costs in case of a poor monsoon, and an increase in crude oil prices given that India is a key net importer of crude.