DAILY VOICE | 2 big plays post-vaccine are consumption and BFSI sectors: Dinshaw Irani of Helios India

Market Outlook

Dinshaw Irani, chief investment officer of Helios India, believes that a bigger opportunity will be once the vaccination process reaches a certain threshold, he said. Vaccination of the masses will ensure the economy fully opening up sans any restrictions. This in itself will be a very big positive.

Irani has nearly 30 years of investing experience. Prior to Helios, he was executive director at Artemis Advisors (exclusive research advisors to Helios Singapore) for over 14 years.

In an interview with Moneycontrol’s Kshitij Anand, he said this decade will see the full impact of the millennials entering the equity market. They have grown up in an age of plenty, are well educated, risk-takers and eager to add to their finances.

Here are edited excerpts from that interview:

Q) After an initial sell-off by FIIs in the first week of March, things seem to be stabalising now? Which phase of the bull market are we in?

A) The market has done well if we look at it from the bottom last year but if we look at it over the past 12 months, 24 months, 36 months, etc. returns have been good, but not spectacular.

The market is in fair territory and that is a good place to be for over time equity markets should do better than other investment options available.

With prospects of strong economic recovery, reforms, privatizations, low-interest rates, and strong FII flows, markets should do well over time.

Q) Are there any vaccine plays which investors could look at in the next 6-12 months?

A) Instead of vaccine plays, the bigger opportunity will lie once the vaccination process reaches a certain threshold. Vaccination of the masses will ensure the economy fully opening up sans any restrictions.

This in itself will be a very big positive as with increased confidence, consumerism will pick up the pace.

Consumerism was lagging in the past given the uncertainty due to the pandemic. This increased consumerism will lead to increased financing requirements. Thus the two biggest sectors that stand to benefit will be consumer and finance (BFSI).

Q) Do you think more retail investors will join D-Street in FY22? They made it clear that the new age investors are well informed and know about the products.

A) This decade will see the full impact of the millennials entering the workspace. They have grown up in an age of plenty, are well educated, risk-takers, and eager to add to their finances. We will certainly see them adding to the retail investor population.

Q) The financial year FY21 is coming to an end and Nifty50 has rallied by about 30%. What really stood out for you in the last 12 months?

A) A few things that stood out for us during FY21 were:

First and foremost, we launched our first domestic offering – India Rising PMS. We launched our PMS in the most trying time – in the midst of an impending lockdown and an out-of-control pandemic.

Despite the challenges, our PMS has done very well and has scaled up to a level from where we see a multi-year growth in our Asset under management.

The power of central bankers to print money in order to support consumer sentiment. The G3 bankers pumped in about USD7.6 trillion during CY20 which went a long way in assuaging bruised consumer sentiments. In contrast, between 2009 – 2011, years following GFC, they cumulatively printed USD2.4 trillion.

The power of our local corporates to cut down on overheads. Following the announcement of a countrywide lockdown in March 2020, analysts started aggressively cutting earnings estimates. At the beginning of FY21, the NIFTY50 company earnings were expected to see in excess of a 30% decline during the year.

However, the corporates went into overdrive to cut both fixed and variable expenses. The cuts were so aggressive that with the declaration of every quarterly result, the analysts started upgrading earnings.

After the December quarter results, the FY21 earnings growth for NIFTY50 companies stood at a positive 10-15%.

Q) Where do you see markets heading in the next financial year. Any target which you have for Sensex, and Nifty?

A) We expect the markets to remain buoyant in the coming fiscal year, too. With the GDP expected to grow in early teens, the earnings growth rates too should be attractive given that it is off a low base. That should provide a fair bit of support to the market.

On the valuation front though the markets look a bit stretched but the high earnings growth and low interest rates may justify the same.

We do not put any specific targets on the index but we expect that over time the index will outperform the nominal GDP growth by a few percentage points.

Q) Small & Midcaps came to the limelight in FY21 and do you think the momentum will continue in FY22 as compared to largecaps and why?

A) Over time Indian market has given very attractive returns when compared to fixed income returns or returns from physical assets like gold or real estate.

We do not choose stocks on the basis of large-cap or mid-cap but based on their leadership prospects and potential. It is best to be highly selective and we are hoping that our themes – which have a lot of runway for growth- will do the job.

Q) Any event or risks which investors should watch out for in FY22?

A) The few risks that we believe can be a spoiler for the markets are the tightening of liquidity leading to rising interest rates, inflationary pressure, and the vaccination drive not being as successful in curbing the pandemic.

The chances of central bankers tightening liquidity look slim as they want growth to kick in for good and are tolerant towards temporary spikes in inflation and growth.

Inflationary pressure too seems slim as there are enough capacities in the system to take care of demand surge. The last point only time can tell.

Q) Which sectors will hog limelight in FY22 and why?

A) The 20s decade itself will be very exciting. The pandemic has only accelerated trends that would have taken years for adopting. The decade will be known for the adoption of new technologies by both consumers and corporates. With millennials joining the earning class, consumption and BFSI will get a boost.

As a result of this surge in consumption, the corporates will have to enhance capacities thereby again giving the financial sector a push. The pandemic has also ensured that health and hygiene take front seat.

Keeping the above in mind, the sectors that would benefit would be BFSI, Healthcare, Consumer Discretionary, IT, Pharma, Speciality Chemicals.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.