Ankur Maheshwari, CEO, Equirus Wealth, advises investors to avoid the noise in the short term and take investment decisions for the long term. India clearly seems to be coming out of the COVID impact very well and better-than-expected earnings in the last quarter reflect the same, he added.
Maheshwari, who has an experience of 15 years in the capital market, recommends clients to add/remain invested in equities and look at every dip as a buying opportunity.
In an interview with Moneycontrol’s Kshitij Anand, he said it is slightly early to say if commodities are in a super-cycle, but the economic revival will certainly lend support to demand-based price inflation in commodities.
Edited excerpts:
Q) Indian market seems to be in a firm bull market, but weak global cues could be a spoiler in the short term. What would you advise investors?
A) It is difficult to predict market behaviour in the short term as it tends to get influenced by more near-term sentiment which may not necessarily be right.
Our advice to investors has always been to avoid the noise in the short term and not take investment decisions basis that.
Over the longer term, India clearly seems to be coming out of the COVID impact very well and better-than-expected earnings in the last quarter reflect the same.
Hence, we would recommend clients to add/remain invested in equities and look at every dip as a buying opportunity.
Q) What is happening with commodities? Crude seems to be inching higher, we are seeing some action in metals as well. Do you think we are entering the commodity supercycle for the first time since 2008?
A) Expected economic recovery is acting as strong support for most of the commodities. With COVID-19 impact reducing and interest rates keeping low the world over, firms can now start looking at expansion and thereby fuel economic activity. This is providing a boost to commodity prices.
It’s slightly early to say if it is a super-cycle, but over economic revival will certainly lend support to demand-based price inflation of commodities.
Q) A lot of beaten-down stocks are beginning to get buyers’ attention. Any Dark Horses which investors can look at and why?
A) One sector that seems to be poised for a favourable interest is the infrastructure/capital goods and related segment. This theme has not played out well for last many years.
However, with Budget announcements focussed on it and valuations being in favour, next few years could see a run similar to the famous 2003-07 infrastructure-led rally.
Q) Gold seems to be inching towards a bear market (a fall of 20% from the highs). What are your views, and what should investors do with the yellow metal?
A) Gold saw a surge in prices largely driven on the following counts – (1) Macroeconomic concerns & build-up of recessionary scenario across the globe due to the COVID-19 crisis, (2) surplus liquidity in the economy owing to central bank actions, (3) historically low-interest rates across the globe, which do not show signs of moving up anytime soon, and (4) Investors’ preference for flight to safety in turbulent times.
From an investor’s perspective, gold has always acted as a hedge. However, with the change in economic & market sentiment, allocation by investors has moved to riskier assets from safer assets such as gold. We believe gold should be 5-10% of a portfolio on a steady-state basis.
Q) Small & Midcaps seems to have caught investors’ fancy as the segment is turning out to be resilient even on dips. What is powering the rally?
A) Amid the economic cycle revival and expectations of resumption of business activities in a post-COVID world, the sentiment has changed from risk-off to risk-on.
In line with that, mid & small cap provide that opportunity to an investor, where owing to high beta, there is significant scope for return & alpha generation if the right stock selection is done. Hence, there is increased interest from investors, who have higher risk appetite.
Q) Amid the privatization buzz – what should investors do with the PSU space?
A) PSU as a sector in India has had only limited success with regards to value creation for an investor. The reasons have been many – lack of clear strategic direction, stiff competition from the private sector, inefficient capital allocation, amongst others. So, while there has been a lot of buzz on privatization, we would be wary of investing in this space only basis news flow.
Q) Where is smart money moving especially in the last few weeks – global setup has changed a bit, and on the domestic front strong micro and macro data does suggest economic and earnings recovery in the offing?
A) From an asset class perspective, equity seems to be back in favour with both foreign and domestic investors.
The interest has also moved from defensive plays like consumption to more cyclical plays like infrastructure and commodities.
From a market-cap segment perspective, investors are open to taking a higher risk by allocating incremental capital in mid & small caps.
Q) How are foreign investors viewing India especially after rise in US Bond Yields?
A) Rising yields in the US and India have triggered concern over the negative impact on other asset classes, especially equities, and even gold.
Traditionally, when yields rise in the US, FPIs move out of Indian equities. Also, it has been seen that when the bond yield in India goes up, it results in capital outflows from equities and into debt.
However, given ample liquidity available globally and strong economic revival anticipated in India once dust around Covid settles down, equities could continue to do well.
