Interview :: Top four investment mantras to beat market volatility: Madhusudan Kela


ECONOMICTIMES.COM | Jan 25, 2016, 02.54PM IST

NEW DELHI: Domestic investors may have lost close to Rs 9 lakh crore on the BSE so far in calendar 2016, largely led by a global selloff in equities, but Madhusudan Kela, Chief Investment Strategist at Reliance Capital, says the long-term bull market in India remains 100 per cent intact.

“The long-term India story is intact. I can thump the table and say that the long-term India story is intact. The bull market is 100 per cent intact. If it was not, I would not be giving you interviews,” Kela said.

Kela said what the domestic market is going through is a structural correction, and it is not in a bear market as such. The current correction across the globe might look like similar to what we witnessed in 2008, but the situation is not the same at least for India.

“This is a structural correction which may last a couple of months because once markets fall, specifically globally, a consolidation can happen,” Kela said.

“We have to watch the global events. I am not saying whether it is 2008 or not 2008. At this point of time as things stand, it does not look like 2008 at least for a country like India,” he said.

Madhusudan Kela listed four investment mantras in an interview with ET Now, which he said can steer investors comfortably in a volatile market:

Stay put in equities

One cannot evaluate performance based on six months’ return, because equity investment is not supposed to be made for six months or 12 months, specifically by retail investors. It is more of a long-term play.

“When you buy equity, why are you gauging your performance. Let us mind it, a majority of the Indian public has not yet participated in the market. We know the numbers, not even 3 per cent of the savings has come in yet to the stock market,” Kela said.

“Even though inflows to mutual funds in the past 12 months have been very good, if I take a five-year cumulative view, there is still net outflow from equities,” he said.

The absolute saving has gone up, the absolute size of GDP has gone up, the absolute size of financial savings has gone up, but net-net no money has come into equity. So this kind of a correction which has kept the medium and long-term bull market intact is a fantastic opportunity (for investors who are looking to invest in equity markets).

Buy systematically for great returns

Long-term bull markets remain intact, and investors should look at buying Indian equity systematically. “Do not be afraid. Just because Madhu Kela said that 7,200 is a good point to buy, you don’t put all your money at 7,200,” explains Kela.

“What I am saying is that markets have their own reasons and we all make our assessments and judgements based on what are the variables which are available today. If the variables change, we will change our opinion, but I am saying anyone who systematically invests through this year, he will make money in the next three to five years” he said.

Kela expects the market to be much more volatile in the first six months.

Contra call: Buy banks for next 3-4 years

Banking stocks have been on the wrong side of the market so far in calendar 2016. The S&P BSE banking index has lost nearly 10 per cent so far, with some stocks registering a double-digit cut.

“There is definitely some absolute problem in the banking space, but I think the fears are significantly exaggerated. When I meet the analyst community, even for private sector banks, they want to tell me whatever is their corporate and international book, 30 per cent will be completely written off. You take 50 per cent might be bad assets,” Kela said.

“If I take 25-30 per cent off from the balance sheet, which is to be written off over the next three-four years, some of these banks are trading at very compelling opportunities from a three-four-year perspective. Investors who have a three-four years perspective should buy bank stocks than put money in bank deposits,” Kela said.

Hope for midcap investors

The fall in the Indian market was largely led by a double-digit fall in most of the smallcap and midcap stocks, which outperformed the market in the previous calendar.

“I would not say all midcaps have a problem. Wherever there was too much euphoria, all those have corrected now,” Kela said. “Some of the midcap companies have been seeing some kind of euphoria in the last two-three years, which got built into because a number of new investors have come in,” he said.

Source : http://goo.gl/ERVnCX

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