Santosh Joseph of Refolio Investments
“Insurance stocks are ideal for people’s long-term portfolio,” Santosh Joseph of Refolio Investments says in an interview to Moneycontrol.
The financial services professional with over 20 years of experience in asset management, banking and insurance believes having a bit of insurance stocks in the portfolio across life and health makes sense in the given scenario, with massive under-penetration and growth story for the industry.
The chief executive and founder of Refolio Investments says private bank is a preferred choice against PSU bank because of better operational efficiencies and better management strength to squeeze out better earnings within the sector. Excerpts from the interview:
What’s your take on private banks (over PSU banks) after a strong set of earnings scorecards?
Banks and financial institutions (BFI) have done very well with the recent earning numbers and there is a great opportunity with the good growth of credit off-take in financial services, especially the banks will do well.
If you ask yourself a question of a private bank over a PSU bank, you would normally root for a private bank because of better operational efficiencies and better management strength to squeeze out better earnings within the sector. Overall the sector seems to be in a good bullish trend.
What is the biggest advantage with India that can lower the global recession risk if it comes?
The kind of exposure that India has is what makes us unique and maybe more immune to a global recession risk. Below are a few:
Unlike the rest of the world, we didn’t go for mindless stimulus when it came to Covid. Printing of money and low interest rates were not the situation in India. Therefore, when the rebound happened, we did not have excess liquidity or money printing.
Thanks to the vibrant entrepreneurial ability in India, whenever we come across severe odds, we are able to navigate well, this puts us in a great spot.
In spite of a lot of adverse global situations that we have been through in the last five to six years and the big changes like demonetisation, GST and then RERA and other global headwinds that came against us, our businesses have become resilient, our balance sheets have become more robust and better than before.
Therefore, we have that huge edge and we were anyway used to slightly above normal or higher interest rates in our country. Unlike the developed parts of the world who were used to low interest rates and the current rise in interest rates because of inflation is causing a challenge. India was used to a good amount of inflation even before this.
Should one delay investment in IT stocks given the concerns likely in the short term?
Regarding the IT industry, we have seen a lot of action lately in the last year or so. Most of the stocks are down 30-40 percent and one could look at waiting to find a bottoming out scenario. While others are looking at this as a contra bet and start entering IT.
The question of delay comes if you are waiting to catch this really at the bottom before the turnaround happens. For some people who are happy with the correction that’s already on the table, from where we were about a year and a half ago, this could be an opportunity for a long term investor.
For some of you who are a little more circumspect about the whole sector, you may want to wait for the bottoming out and a recovery before taking a call in it.
Do you see any possibility of around 10-15 percent equity market correction, by any chance, from here on?
The possibility of around 10-15 percent equity market correction at any given point of time is possible and we should not rule it out. Equity markets are risky markets and they contain risky assets and we are prone to so many factors both domestically and globally and sometimes factors that we can not predict.
The year 2022 is a great example of how the Russia-Ukraine war made the whole financial markets, both equity and debt, get into a tizzy with currency and interest rates going haywire and equity markets also being extremely volatile.
One should always anticipate a 10-15 percent correction or likewise a sharp run-up also in a short while. Knowing that markets can be swayed 10-15 percent in short to medium term is one good way of looking at things and being more practical about it.
What are your thoughts on the insurance space and do you advise people to keep these stocks in a portfolio?
Lately, insurance companies have been under severe stress and I think this had to do with the last two years of covid and insurance companies are adjusting themselves into the number of claims that they have got and also their own business that has been under stress.
Though insurance stocks are usually known to be long-term stocks, investors also want to see where the growth is happening even in a medium to short term period, especially for someone who is looking for a really long term buy and hold or hold stocks that have longevity.
Insurance stocks are ideal for people’s long term portfolio. Of Course everybody looks for value and the fastest turn around, and insurance companies have not been able to meet that kind of a requirement or the need in the interim.
Having a bit of insurance stocks in the portfolio across life and health makes sense in the given scenario, with massive under penetration and growth story for the industry.
Do you think we have already seen a bulk of rupee depreciation against the US dollar so far?
We have seen almost a 7.5 to 8 percent rupee depreciation in the calendar year 2022, and a little bit of it is already retraced. In the near term we are closer to seeing most of it if not all of it, and further action across the world and even in our own economy and how we sustain it is going to be determining the future course of action about the rupee-dollar relationship.
But I think we are just a little more pronounced in our depreciation so far, and therefore you could see that in the last couple of weeks, there has been a little bit of appreciation. We have anyway experienced a 3 percent to 4 percent depreciation of almost over 10 years consistently. This year it has been double of that.
We may more or less be at these levels for a while.
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