India’s equity market has seen high volatility in the last couple of months, as a result of which safe blue chip stocks have performed exceedingly well while the small and mid-caps are struggling. Anshul Saigal, Portfolio Manager, Kotak Mahindra AMC tells Arshad Khan that volatility is expected to come to an end in the next few months and investors will start showing confidence on stocks that haven’t done well in recent times. He also said that FMCG, automobile and real estate sector stocks will see upward movement due to sectorial reforms. Excerpts from the interview:
In the last one month, market has been going up and up. Is it a right time for new investor to join the rally?
When we invest in the market, we have to keep in mind that the market is uncertain. If you think you will invest for two to six months and make money and not lose anything, it is a fallacy. So anybody who comes in the market, he should be okay to take 10-20 per cent loss before start making money. If one invests in the equity market for at least three years, he/she can never go wrong in the Indian market.
Systematic changes like GST and DBT brings multiyear changes in the economy. Buying a quality mutual fund or equity instrument will fetch you at least 15 per cent y-o-y. So if you invest Rs 100 now it would become Rs 200 in five years.
Mid-cap and small-cap stocks haven’t performed well in the recent rally. Should an investor put his money in these stocks?
Last year mid-caps had rallied. This year few things could have happened such as high volatility leading to price correction and time correction. What really happened in the first six months is that the risk of trade played out. What happens in the risk of trade is that you want to play in liquid names, remain safe by investing in RIL, TCS etc whereas you sell unsecured stocks such ICICI, Tata Motors etc. What happened in the last 6-8 months is that the safe stocks have become very expensive and others lost their value.
Things will change in the next one-two month and people will start focusing on them as there is a lot of opportunity.
Which sectors do you think will outperform others?
Consumption oriented sectors will do very well. FMCG and automobile will do well. Real estate sector has also started showing signs of revival. Real estate volume and not prices (in the short run) are expected to go up which will increase the firm’s profitability. Weak players because of RERA Act are moving away and the players with strong balance sheet will become stronger. It will be very difficult for Jaypee, Unitech to bounce back whereas Lodha, DLF, Oberio Realty would do well.
What is you view on the bond market?
I don’t think it will downgrade from the current levels. Whatever bad was to happen has already happened. Crude prices are up, liquidity in system decreased, currency down, inflation up.
Between equity and debt, what should be the ideal portfolio mix?
The call should be made after considering one’s age and risk profile. If you are young, the greater should be your allocation towards risk i.e equity. As you grow older, your allocation towards debt should start growing. Till you are 40 years old, 50-80 per cent of your money should be in equity for a long term. One can expect 15 per cent compounded return in equities (risk factor associated) while debts can give a return of 5-10 per cent if you remain invested for at least 10 years.