Fund Management & Equity Research

Your outlook especially on equities and impact of the pandemic COVID-19 on the businesses?

Since October 2019, we have been bullish on mid & small-cap segments and still, we are extremely bullish on the same with a 3-5 years view. In March 2020, we had given a thumping the table buy call on equities. Umpteen number of conference calls we did during that period to convince our partners to invest aggressively into our equity funds on the lumpsum basis and also, we wrote in the CEO Commentary of our factsheets during March/April and May 2020) which has done well by now.

The life after COVID-19 is quite different from that of the past. World over governments and companies are aiming to de-risk their supply chains, improve the infrastructure, healthcare and also have started focusing on creating more self-defence for themselves.

US money supply growth is unprecedented this year to the tune of 24.4%. Normally this number used to be 5-11%. Because of the massive liquidity boom we see the probability of FII flows to be strong in the coming 12-18 months as well. So liquidity will decide the market up-move in the near to medium term but we see strong earnings rebound also to happen in the same period, which can lead to higher market valuation.

What is your outlook on Indian Economy?

India has gone through significant structural changes in the last 4 years which were led by Demonetization, RERA, GST, tax cuts and agricultural reforms. Many sectors were going through the down cycle in the last 10years which have not been the sectors preferred by the investors.

We are at the boom of the economic cycle, corporate profitability is at multiple decades low, all macro indicators are suggesting bottom of the economy ( IIP, GDP Growth, credit growth etc.). All these numbers are starting to rebound. Positive developments on vaccines and prompt actions from central banks & central governments globally has changed the growth outlook to be positive.

Do you see any chances of correction in the market in near future?

Correction can happen any time and that is the nature of markets. We have seen even during the roaring bull market of 2003-2008 period, in May 2006, markets corrected quite sharply and then recouped. This can happen in this period also.

Which companies are you bullish on after this significant run-up since March 2020 till now?

At this juncture, we are also bullish on the cyclical large-cap stocks which are primarily from the sectors like engineering, capital goods, industrial products, real estate, utilities and select banks & financial services companies. We expect this basket to outperform the nifty index over the next 3-5 years. We see a huge margin of safety here.

These stocks are available at a fraction of their historical valuations at this point of time. So we are quite enthused to construct a portfolio of attractively value large-cap stocks.

a. Large-cap companies are big companies, with a proven track record, strong cash flows, and are leaders in their respective sectors & businesses.

b. They are generally stable and can withstand business downturns and external shocks and therefore they can sail through turbulent times quite easily.

c. Good quality large-cap companies re-invent themselves and keep growing by adapting to the times.

d. Large-cap stocks provide stability to the portfolio and can potentially compound your wealth over the long term with lesser volatility.

Your Investment Philosophy

Based on our combined investment learning of more than 50 years, we have institutionalized very strong and unique investment philosophy SQL, this is core to our fund management framework and approach to our portfolios. We strongly believe that good quality (Q), low leverage companies (L) and bought with a reasonably good margin of safety (S) makes the investment very attractive and rewarding for our investors.

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