Prasun Gajri – Chief Investment Officer, HDFC Life, said that after a strong FY21, earnings for FY22 have begun on a healthy note. Q1FY22 earnings are more or less in line with expectations.
An IIM Ahmedabad alumnus, Gajri has over 14 years of experience in the investments and banking industry. In the past, he has worked with Citibank for over 6 years delivering various roles, and prior to that, he was with Tata AIG Life Insurance Company.
In an interview with Moneycontrol’s Kshitij Anand, Gajri said it does seem that the earnings upgrade cycle is over with most of the positives being reflected in the earnings estimates going forward, but we believe that earnings in FY22 can grow over 30% while those for FY23 can grow in high teens.
Q) Indian market hit a fresh record high in August after witnessing some consolidation in July. Where do you see markets headed?
A) It is always important to focus on individual stocks and not just on the aggregate market indices. In the current market where stocks across the spectrum are moving up, it becomes doubly important to focus on stocks where the fundamentals are strong and the business models are robust.
It is extremely important not to judge a stock just by the price appreciation it is enjoying but also focus on whether the move is justified by fundamentals.
While the markets may continue their upward move, what matters, in the end, is the nature of the underlying portfolio as the fundamentals eventually catch up.
Q) The latest US Fed statement highlighted that a number of FOMC members argued that the tapering should start with knocking off the USD 40 billion monthly purchase of MBS. How will it impact Indian markets?
A) Unlike 2013, when tapering came as a big surprise for the markets, the tapering event is well communicated this time. The market is anticipating the same.
While there may still be some turbulence in the markets, we do not anticipate a major change.
Q) The big China crackdown on ed-tech companies triggered jitters in equity markets across the globe last week. Do you think there is a silver lining for India or Indian firms in listed or unlisted space?
A) It is a little early to say whether Indian companies or markets will benefit from this event in China. It all depends on the nature and source of the capital invested in these Chinese companies and how and when they want to redeploy once they exit from Chinese entities.
So far there does not seem to be much evidence to show that there has been a big positive impact for India. However, one will have to wait and watch.
Q) Plethora of IPOs will be listed in the second half of 2021 – what do you make of the IPO frenzy on D-Street? How should investors evaluate IPOs ahead of investing?
A) There has been a lot of IPOs and virtually all of them have given good listing gains. Hence, there is a frenzy to participate in all the IPOs now.
It is very important not to judge the IPOs from their listing gains or initial performance. It is critical that investors review and judge the business models and financials of individual companies and stick to the companies where they are convinced of the longer-term prospects of the company.
Our observation is that not all companies coming up for IPO’s have strong business models and hence investors need to be discriminating in their choice of companies.
Q) What do you make of the June quarter results so far which have come? And, your estimates for the FY22, and FY23
A) After a strong FY21, earnings for FY22 have begun on a healthy note. Q1FY22 earnings are more or less in line with expectations.
The damage from the second wave of COVID-19 and the consequent lockdown in April’21/May’21 has been much lesser than that from the national lockdown in the first phase.
While management across the board suggests an improved outlook post June’21, the impact of rising commodity costs and higher inflation has started showing up.
Asset quality across the financial sector has weakened. Also, it does seem that the earnings upgrade cycle is over with most of the positives being reflected in the earnings estimates going forward.
We believe that earnings in FY22 can grow over 30% while those for FY23 can grow in the high teens.
Q) As we enter August – ‘Independence Day’ is something which we all look up to. How can one become financially independent by the age of 40 in case he starts planning by 25.
A) I am not sure if 15 years is adequate time for anyone to plan and become financially independent unless the income stream itself is quite high. Being financially independent requires both time and discipline. There needs to be a proper plan keeping individual circumstances and risk appetite in mind.
One needs to adhere to the plan in a disciplined manner and keep reviewing it at regular intervals. The process cannot end at 40 and needs to continue – one also needs to plan for their retirement.
Most of us save and hope that equates to a financial plan. That’s not how it works. Hence it is critical to have a proper financial plan for the long term.
Q) What is your mantra of long-term investment? Any principles or guidelines which you stick with when investing?
A) Long-term investment for me means having a plan and investing regularly through the market phases. I do not believe that market timing works for most investors and hence allowing compounding to work over longer time periods through the market ups and downs is the best bet for long-term wealth creation. This is the core guiding principle for me.
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