In an interview with ETMarkets, Andani, said: “Sectors focused on the domestic economy, especially the manufacturing sector have a better growth visibility versus sectors whose outlook hinges on global growth environment” Edited excerpts:
2022 is slowly turning out to be a roller coaster ride for investors as well as fund managers with too many variables impacting the Indian market. How are you managing the volatility in your fund?
Volatility has increased for global as well as local markets since the Russia-Ukraine conflict started. The cost structures of many businesses have been affected due to raw material shortages and consequent inflation, multi-fold increase in power and utilities costs as well as straining of diplomatic relations among countries.
Liquidity tightening and rising borrowing costs have compounded the problem. However, volatile business conditions give opportunities for active fund managers to pick stocks that they like.
We have been focusing on owning businesses that are least affected by macro factors and have the ability to deliver in a difficult business environment.
Why are FIIs selling best-performing market? India stands out among the EM pack, but still facing outflows. When will the trend reverse according to you?
With the meaningful rise in interest rates, the money is moving away from the equities market which saw phenomenal returns from the covid lows.
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It is a bit of profit booking from one asset class and deploying in another asset class where perceived returns may look better now.
The Indian equity market has outperformed other markets supported mainly led by inflows from domestic investors which have absorbed the selling pressure from the FIIs.
What is the kind of cash levels you are sitting at – are you putting aside more cash to be deployed later?
We have internal fund templates which define the cash limits apart from other fund attributes. The idea is not to take large cash calls but maintain cash within a narrow range.
We are always focused on looking for investible ideas during volatile market conditions.
Where do you see markets in the next 1 year?
The market levels would be a function of the growth environment and interest rate outlook. While the markets have corrected somewhat from the peak, we may witness an earnings cut cycle which would still make valuations demanding.
While the broad indices may remain range bound or in a corrective phase, stock-specific returns may vary significantly depending on how well different businesses perform in difficult business environments.
Any sectors according to you could remain in limelight till the next festive season?
Sectors focused on the domestic economy, especially the manufacturing sector have better growth visibility versus sectors whose outlook hinges on the global growth environment.
In general, businesses with lower capital requirements and lower leverage on the balance sheet should outperform others.
How did you fall in love with equities – what was the turning point?
My love for equities dates back 2-3 decades. The ability to co-own diverse businesses and generate wealth in the process was the driving factor that made me fall in love with equities.
It is an asset class that outperforms all other asset classes if one is a patient investor with a long investment horizon.
Also, one can participate with a lot of ease even with small ticket sizes and the liquidity available at any time. Hence, it remains my favourite to date.
SIP contributions have only increased significantly in the past which is a positive sign for Indian markets. Do you see the trend continuing? Any ballpark figure you see by the end of FY23?
Increasing SIP trend indicates a culture of regular disciplined investing picking up, which is a sign of increasing maturity and depth of the market.
However, the pace of growth picks up when historical returns (generally the last 3 years’ returns) look attractive and vice versa. It’s difficult to put any number there.
While the long-term trend is positive, we may see volatility in the same from time to time.
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