Viraj Gandhi of Samco Mutual Fund
“June lows in 2023 cannot be ruled out completely. International factors such as intensification of China-Taiwan conflict or Russia-Ukraine war and inflation staying sticky for longer than expected leading to elevated interest rates across the globe can materially derail the markets,” Viraj Gandhi of Samco Mutual Fund said in an interview to Moneycontrol.
On the domestic side, he says stretched valuations of a few segments of markets and upcoming general elections can lead to some correction in 2023.
The Chief Executive Officer at Samco Mutual Fund with more than a decade experience in capital markets advises that one should behave rationally when markets behave irrational.
The best vehicle for a young investor to compound his/ her wealth for the future would be mutual funds, he says.
What is the best suitable theme for 2023 and why?
For 2023, we believe India-specific growth story will be in the limelight for two reasons:
A) Growth across major economies of the world is expected to be muted
B) General elections in 2024 typically bound to witness strong momentum in sectors such as defence, infrastructure spending and capex from the government.
Do you see any kind of major challenge(s) that can bring equity markets down to June 2022 lows in 2023?
June lows in 2023 cannot be ruled out completely. International factors such as intensification of China-Taiwan conflict or Russia-Ukraine war and inflation staying sticky for longer than expected leading to elevated interest rates across the globe can materially derail the markets.
On the domestic side, there are a couple of factors which can lead to some correction like stretched valuations of a few segments of markets and upcoming general elections.
Do you think the equity markets are still worried about likely recession in developed nations in coming year?
Markets are always forward looking and scenarios like this provides opportunities to accumulate quality stocks at very attractive valuations.
A few pockets across the globe are showing signs of slowdown and we are yet to see revival data from that segment. Because of this situation, Indian indices actually hit new highs instead of lows.
What is your advice to new investors/traders as we go into 2023, especially after your 30 years of experience?
The biggest learning throughout my career is to behave rationally when markets behave irrational. Easier said than done, because a lot of noise and narratives surround us.
During such situations if as an investor I am clear of what I want to buy at what valuation rather than swaying with the crowd then long term compounding of thoughts and wealth will be above average.
The best vehicle for a young investor to compound his/her wealth for the future would be mutual funds.
Do you expect the Union Budget 2023 to be much better than previous Budgets? What are your broad expectations?
We are blessed to have a stable and consistent government at the Centre in the past few years which enabled us to sail through such events due to strong governance. This government is consistent with reforms and capex. We expect the Budget to be on similar lines in 2023 as well.
Do you think the market is still cautious about FOMC’s stance for 2023?
For Indian indices, despite newer highs, euphoria is still a distant phenomenon. One of the reasons for such cautious optimism is due to FOMC stance to raise interest rates at a galloping pace in the past few months.
The percentage of stocks hitting 52-week highs is only around 3 percent while during euphoric levels, this number is around 12 percent. There are only 3-4 stocks in F&O Ban where we typically see around 10-12 stocks during previous highs.
Considering the consistent rally in banks, are the FIIs increasing exposure to banks?
Rising interest rates, falling NPA and higher credit offtake bodes well for banking sector and we saw FII inflows tilted towards this sector; be it private or PSU banks, mid or large size.
The valuations are getting stretched in certain pockets of this sector and one should be very careful in stock picking at current levels.
What is your strategy behind the ELSS tax saver fund?
There are 40 ELSS schemes (including Samco) for the investors. Majority of them have exposure toward largecap stocks to the tune of 70-75 percent, barring a few names.
We tend to provide a differentiated offering because we aim to have over 80 percent exposure towards midcap and smallcap quality companies. Due to a 3-year lock-in, nature of the product and the volatility that associates with midcap and small cap companies tends to moderate down by the end of first year will help in providing higher potential returns for investors.
Mid and small caps have historically shown to deliver much higher returns with higher risks than largecaps on a 3-year rolling basis. The Nifty MidSmall Cap index has delivered 48 percent returns while Nifty50 has delivered 40 percent returns on a 3-year rolling basis since 2005.
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