Vineet Bagri of Athena Investments
In CY23, “equity investors would be better off focusing on pockets of domestic growth versus export-driven companies,” Vineet Bagri of Athena Investments told Moneycontrol in an interview.
Another interesting theme to watch for over the next year, he said, is the performance of companies that have strong brands but that have seen their margins decline. Such companies are likely to benefit from the ongoing easing in raw material prices and could thus see stronger bottom-line growth versus CY23, said Bagri.
“Over the past several months, we have witnessed a steady decline in global growth projections for CY23. This one factor will majorly determine the trajectory of equity markets over the next 12 months,” says the Chief Executive Officer and CIO of Athena Investments. Bagri has 23 years of experience in the financial industry across banks, NBFCs and advisory services.
What would be the best strategy for retail investors to follow in the coming year, given the expected challenges for equity?
At current levels, our market is fairly valued and hence the upside from here could match the earnings growth over the next 12 months, presuming no further expansion in valuation multiples. This would be the base case for Indian equities for 2023.
Given this scenario we believe the market could try one’s patience in the year ahead. The best strategy in such a scenario would be systematic/regular allocation to equities and thus get positioned to reap the fruits of an eventual recovery post the current timewise correction phase.
The year gone by had a lot of news that created a lot of volatility in the equity market. What are your thoughts on the next year and the expected challenges for the market?
The ruction in the first half of 2022 was dominated by multi-decade-high inflation globally, surging crude, hot metal prices, unwinding of easy money and FPI outflows. These factors were the culprits that caused volatility in CY22.
The major uncertainty surrounding CY23 relates to global growth rates. Over the past several months, we have witnessed a steady decline in global growth projections for CY23. This one factor (global growth) will majorly determine the trajectory of equity markets over the next 12 months.
What are the expected bullish bets for 2023?
In CY23, equity investors would be better off focusing on pockets of domestic growth versus export-driven companies. Another interesting theme over the next year could be companies with strong brands that have seen a decline in margins. They are likely to benefit from the ongoing easing in raw material prices and could thus see stronger bottom-line growth versus the topline in CY23.
The auto sector, too, is likely to see better margins/profits due to the decline in metal prices and easing of semi-conductor shortages.
After many years the banking sector is now back to 15 percent+ credit growth coupled with provisions at business-as-usual levels. This will lead to steady growth in profits.
What are your thoughts on the IT space as several global experts expect the global slowdown to impact the sector?
Large corrections for Indian IT companies over the last few cycles have been driven mainly by valuation. While we see a risk of revenue cuts in case US GDP growth slows down further, we do not believe this will translate into large EPS cuts given that IT companies have margin levers. IT valuations are stretched.
However, we believe that the re-rating of IT services companies is on account of them being able to prove time and again that they are not just outsourcing agents (for cost arbitrage), but partners to enterprises — reducing their time-to-market and helping them stay relevant to end customers.
Again, with cloud implementation providing healthy near-to-medium term revenue visibility — it is definitely a tailwind for the sector. Healthy payouts to shareholders help prop up return ratios, helping companies trade at better valuations.
What is the strategy behind your new alternative investments fund, launched recently?
The Athena Stock Convertible Scheme aims to generate absolute returns on a monthly basis with low correlation to equities, using fixed income and derivative instruments. The strategy does not involve any leverage and endeavors to limit large drawdowns in case of black swan events, using hedging strategies.
Can you explain how the AIF Category III is best suited for HNIs?
Category-III AIFs are designed to invest in listed securities across debt, equity and derivatives. These funds can have a maximum gross exposure of two times their investment corpus, which sets them apart from PMS products.
AIFs can be structured to express the style and strategy of the fund manager, and to that extent they have a wide gambit of investment strategies that can be deployed. Fund managers can develop their products around trading strategies, long-term buy and hold strategies, or a mix of the two. The regulations also permit fund managers to run a net short position, if the strategy requires them to do so.Disclaimer: The views and investment tips expressed by investment 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.?
