Just for the sake of valuation, compromising on quality can be dangerous when we have a correction in the market. The standard parameters always remain growth, profitability, cash flow, and return ratios, Kunj Bansal, CIO, Karvy Capital, said in an interview with Moneycontrol’s Kshitij Anand.
Q) What are your big expectations from the Budget 2021? The Finance Minister has already fuelled expectations of a blockbuster Budget – something which is not seen in the last 100 years?
A) The expectations are for the government to increase the spending significantly and not to look at the fiscal deficit. The more the spend from the government, the higher will be the recovery in the economy as well as employment generation.
Needless to mention that a large part of this spending should be in the long-term productive assets such as infrastructure, housing, and health.
Q) Equity markets paint a very rosy picture of the economy and the state of affairs which might not be the true reflections of what’s going on. Does 50,000 scare you as a fund manager or someone who is part of capital market for decades?
A) It is a wrong notion to say that the equity market is a reflection of the economy. It is not. It is a reflection of the only good part of the economy.
The market cap of sectors and companies doing well keep taking indices high. The non-performing sectors and company’s market cap keep falling and their weightage in indices keeps reducing. No, 50k doesn’t scare. This is just another number like there was 10k, 20k, 30k etc.
Q) The year 2020 was a year of reset on all counts and the way we invest has also changed. We saw the entry of retail investors. About 10 mn demat accounts were opened at a time when human survival was in question. Do you think the retail party will continue and the big business will come from Tier 1 and Tier II cities?
A) Retail participation may go down when we have some correction/consolidation in the market. Currently, in an upwardly trending market, an impression has got built up that money-making is very easy in the equity market.
However, the retail participation will continue to remain higher than pre-covid levels. Yes, the next tier of cities will continue to see higher participation.
Q) How are you picking stocks amid record highs? More than 400 stocks are hitting record highs on the BSE almost on a daily basis. What are the parameters which one should analyse?
A) Our stock-picking continues to focus on fundamentals though comfortable valuations for quality are not available.
However, just for the sake of valuation, compromising on quality can be dangerous when we have a correction in the market. The standard parameters always remain growth, profitability, cash flow, and return ratios.
Q) The other big question in front of investors is when to book profits? Is there any mantra which you would like to recommend to retail investors to follow?
A) One wishes that there was an easy answer to this question. If profit booked in one stock is invested in another, it may not help in case of a market correction.
Only if one takes money out of the equity asset class, profit booking helps. So, one has to define the exposure that one wants to keep to equity.
Within that, in a limited way, one can switch from overvalued shares to undervalued shares and from high beta sectors to low beta sectors with rise in the market. However, as I mentioned earlier, these things are easier said than practiced.
Q) How is December quarter earnings likely to pan out for investors?
A) Going by the indications, earnings are likely to be very good, certainly sequentially compared to sept quarter, even if not on a y-o-y basis, even YoY, in large no of sectors is likely to show good growth.
Q) Any pre-Budget picks which you would like to recommend to investors? And why?
A) Generally, there is always a pre-budget rally in fertilizer, agri, and railway related sectors which invariably fizzles out after budget. Instead, investors will be better advised to focus on longer-term trends.
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