Aim to add incrementally to your portfolio over time particularly when the chips are down.
Dipan Mehta | Mar 05, 2018 10:22 AM IST | Source: Moneycontrol.com

Go for direct equity with the help of an advisor or a portfolio manager because mutual funds have high expense ratio and inherent disadvantages, Dipan Mehta, Director, Elixir Equities said in an exclusive interview with Moneycontrol’s Kshitij Anand.

Q) The tables have turned in favour of bears at least in the medium term. The Indian market has become a sell on rallies kind of market. What is your assessment of the market at current juncture?

A) This the fifth year of a bull market which has been a slow steady one with very little volatility. There have been a few corrections and we are in the middle of one at present. For the long-term investor, this is still a buy on dips market.

Whether this correction will deepen or not will become evident over the next 2-3 weeks. If a lower tops/lower bottoms formation get created and broad market indices trade below their 200 DMA (which they are not at present) then we may be in for an extended sell-off or a mild bear market.

Q) What is your advise to investors who want to put Rs 10 Lakh into markets? He is in the age bracket of 35-40 years. He/she is looking at forming a portfolio with direct equities, MFs, a part of fixed income as well?

A) Go for direct equity with the help of an advisor/portfolio manager. Mutual funds have high expense ratio and inherent disadvantages. Set aside an amount of emergency plus 1 year’s salary/income into debt and put the rest into good quality stocks.

Aim to add incrementally to your portfolio over time particularly when the chips are down.

Q) What should be the ideal strategy for investors in terms of sectors? Do you think PSU banks are a good buy at current levels? What are the sectors which you think are likely to show momentum in the year 2018?

A) PSU Banks, IT and Pharma are to be avoided.

-25-35 percent should be in private sector retail banks and NBFCs.
-15 percent in auto and related ancillaries,
-15 percent in Indian FMCG stocks,
-35 percent rest in domestic consumption stocks such as building materials, appliances, aviation, retail, gaming, entertainment, media, fast food, branded apparels, and innerwear.

Q) The US Fed signalled a minimum of 3 rate hikes for the year 2018. Do you agree the global overhang is likely to weigh on Indian markets for the rest of the year?

A) No, but there will be a knee-jerk reaction whenever there is a global sell-off. With the rise and rise of domestic mutual funds, the influence of the foreign investors has reduced dramatically which means that the co-relation on a medium to long-term has weakened.

Moreover, foreigners have been investing for 2 decades and they have a more mature approach to India. We are a better-understood economy and capital market.

Q) What should be the right strategy for investors right now – sit on cash and wait for a dip or deploy cash incrementally throughout the year?

A) Nibble into the bluest of blue-chip stocks. Companies which have missed in the bull market so far must be targeted for investment. Investors must endeavour to improve the quality of the portfolio.

There are two-fold benefits. If the bull market resurges, then these will be first of the block and gain market leadership. Should a bear market evolve, then the damage will be less and investors will be able to sleep better knowing they have quality stocks in their portfolio.

Q) What will happen in the banking space given the fact that the cost of borrowing is inching higher. The RBI might keep rates on hold in its next policy but may raise rates in 2018?

A) Private sector banks and NBFCs will survive and thrive in every interest rate scenario. Growth and profitability will be temporarily impacted but the process of private sector gaining market share at the expense of PSU lenders will continue and gain traction.

Q) With Dollar gaining strength there is a higher possibility of rupee weakness. Which sectors or stocks likely to benefit the most? What is your target level for the currency?

A) Sectors which will benefit are obvious but be sure to assess the basic underlying fundamentals. No business will create value just because the currency is depreciating. Our view on the Rupee is not so negative.

Source: https://goo.gl/VM7cNE

MEERA SIVA | September 18, 2016 | The Hindu Business Line
Once invested, don’t look at the portfolio frequently

Property investments in India do not give enough inflation-adjusted return, but Indian equity and bond markets present a lot of opportunities for investors, feels Saurabh Mukherjea, CEO of Institutional Equities, Ambit Capital. Excerpts from an interview with Business Line:

How do you filter companies before you make an investment decision?

I look for good stocks with high return on capital employed and consistent revenue growth. The industry the company operates in should be attractive, that is, it should be growing at over 15 per cent annually and the top players should have sizeable market share so that profits are not eroded in competition.

Some examples are men’s shaving products, trucks and speciality chemicals. Secondly, the management has to be competent and focused on the core business.

Once invested, it is also important not to look at the portfolio too frequently. Patience is central to success in investing and money cannot be made by being hyperactive.

What red flags do you watch out for?

One must be watchful of corrupt and lazy promoters whose core competence is only making great presentations.

Even good brands in booming industries flounder due to promoter issues. Besides, in India, one in two companies has some sort of accounting issue. So we have a detailed checklist to weed out accounting problems.

Only 100-120 companies in the Indian listed universe meet these checks. I think it is best to avoid companies with governance and book keeping issues as value will be destroyed sooner or later.

What returns do you look for in your investments?

While the quoted inflation rate is a lower number, what I look at is the rate of inflation for my basket of consumption.

This is around 12 per cent. So any investment that I make must meet this cut-off for return. I invest only in products that I understand and avoid exotic asset classes and overseas markets.

What are your current investments?

Due to the nature of my job, I cannot own stocks directly. So my equity investments are through mutual funds. I also have debt investments in Government and corporate bonds.

I feel there may be some tough times ahead globally due to the negative interest rate scenario. Due to these potential uncertainties, I have invested in gold through an ETF.

What are your views on real estate as an asset class?

I own the flat we live in, but beyond that I feel property investments in India do not give enough return. I feel real estate is a silent killer in high networth portfolios insofar as such returns do not keep up with inflation experienced. A 12 per cent return, post tax, is my threshold. Rental yields are very low, at 2 per cent. So buying and renting out a residential property makes little sense.

Also, in cities such as Mumbai and New Delhi, prices went up due to huge amounts of black money. With a crackdown on that, returns will be muted.

Would you recommend direct equity investments?

There are many risks in equity investments and it is best left to experts.

So mutual funds should ideally be a good way for the average middle-class investor to get equity exposure.

However, the reality is that there are many schemes and a plethora of choices that are confusing. Investors rarely get to meet fund managers and there are no reliable filters from which one can pick fund managers.

On the other hand, you can build a portfolio of good stocks by using simple filters.

For example, companies that have seen consistent revenue growth of 15 per cent every year and 15 per cent return on capital employed.

It is possible to build a good equity portfolio with 15-20 stocks and hold it over a long-term.

Our analysis shows that the annual return of such sensibly constructed portfolios can average 25 per cent over a decade.

Buying the stocks when there is pessimism in the market is a good strategy.

One can also do systematic investments in stocks.

Source: https://goo.gl/CJD3fL

By Kshitij Anand | ECONOMICTIMES.COM | Aug 27, 2016, 03.22 PM IST

NEW DELHI: The potential for wealth creation is immense only if you follow a disciplined approach to investing instead of hunting for the one stock that can outperform every other asset class.

Investing is more like cricket, explain experts. You need players with diverse skills such as batting, bowling, fielding, wicket keeping to make a successful team. It will be foolish if you rely on just one player such as a Sachin Tendulkar to help you win matches.

In investing too, diversification is key and mutual funds create that opportunity for you. Keep investing in mutual fund via systematic investment plans (SIPs) to harness fruits of wealth creation for the future.

“Everyone cannot be a Sachin Tendulkar. To become the number one Test team, you do not require all the Sachin Tendulkars in the team. Even if you have 10 other average players and one Sachin Tendulkar, that is more than sufficient to make you wealthy,” Nilesh Shah, MD, , Kotak AMC, said in an interview with ETNow on the occasion of SIP Day.

“It is the discipline that creates wealth rather than hitting every ball for a four or a six. Whether you are keeping your money in fixed income, bank deposits, gold or cash – these are all various ways of savings, but for an ordinary investor the way to invest is through systematic investment plan (SIPs) of equity mutual funds, especially those who are not aware of the intricacies and nitty-gritty of the equity market,” he said.

If you want to create wealth without compromising on your monthly liquidity, then investing via systematic investment plans (SIPs) is your best bet. The nextgeneration retail investors understand the potential of the equity market, and that is one prime reason why we have seen a surge in average SIP investment.

Mutual funds added 12.61 lakh investor accounts, or folios, in June quarter to take the tally to a record six-year high of Rs 4.89 crore. Retail investors accounted for 95 per cent of total mutual fund (MF) folios, Amfi said in a report.

Retail folios comprising 95 per cent of total mutual fund folios expanded for the seventh straight quarter, CrisilBSE 0.14 % Research pointed in a note last month. Around 76 per cent of the total retail portfolios put money in equity-oriented funds for the seventh consecutive quarter amid an uptrend in the stock market.

Most of the mutual fund (MF) houses are mulling launch of more variants of systemic investment plans (SIPs) to attract investors. The variants include SIP topups and smart SIPs.

“No doubt, investors have started to invest in the market systematically. Approximately Rs 3,000 crore is being invested every month up from Rs 1,000 crore two years ago,” Jimeet Modi, CEO, Samco Securities, told ETMarkets.com.

“A major contribution is coming from the working class population and HNIs, as financial literacy is rapidly crossing new frontiers in India,” he said.

Modi said there were 2 million folios two years ago and now it has ballooned to 3.7 million, indicating that more and more people are investing their savings in equities through the mutual fund route.

One prime reason for the enthusiasm displayed by the fund managers is the potential of Indian economy, which can produce wealth-creating opportunities in companies.

At a time when most of the developed markets are struggling to grow, the Indian market has the potential of clocking a growth rate of above 7 per cent. The market has already bounced back 20 per cent from its 52-week low, which is a sign of strength.

“As a thumb rule, if we have tripled our economy in last 10 years, can we not double it over the next 10 years? It is not guaranteed, but possible. Now, if in next 10 years we are going to double our economy, then that economy will create companies which will create wealth for investors,” said Shah.

“If investors give money in the hands of professional fund managers, who have track records of outperforming the benchmark indices by a reasonable margin, it is fair to assume that they will continue to outperform the indices and those funds will end up creating wealth for investors,” he said.

Source: http://goo.gl/2ojvwQ

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

By Biswajit Baruah, ET Bureau | 2 Sep, 2015, 08.16AM IST | Economic Times

Sunil Singhania, chief investment officer – equity at Reliance Mutual Fund, said many global funds have used the current correction in the market as an opportunity to increase their India exposure. Edited excerpts from an interview with ET:

What is the mood among FIIs who have withdrawn $2.5 billion from Indian markets last month?

India continues to be a destination of high interest for all long-term global investors. August was a very volatile month for global equities, and emerging market funds got hit quite badly because of China. This has led to some redemptions from EM funds and thus there has been corresponding selling in India. There has also been arbitrage unwinding by global funds and this figure includes that also.

However, an encouraging trend is that a lot of global funds have used this opportunity to increase their India exposure. I am in New York as I give this interview, there is an increasing interest in investing in country specifics like India rather than EM, which should be very positive for Indian equity markets from a medium- to long-term perspective.

What is your outlook on growth?

The quality of numbers has been positive and improving. Government spending for the first 4 months is up sharply and there are green shoots of growth visible across quite a few industries. It’s a matter of time before the GDP numbers start to trend up above 7-7.5%.

Is the bull market over for now given the recent selloff?

We have done a study of market corrections in India over the last 15 years. Corrections in a structural positive market are the best opportunities to invest. In the past also, whether it is 2004 or 2006 or even 2011 and 2013, we have seen around 10-15% corrections. But they have turned out to be the best periods for investing.

Is the midcap party over?

A pocket of midcaps were very expensive and a correction in these stocks was a matter of time. However, typically when markets correct, the midcaps and smallcaps tend to correct slightly more. We find that even good midcaps have corrected and it’s a great time to invest in them. The uptrend in economy is near and in such situations, smaller companies do grow faster.

What’s your outlook on Fed’s rate hike?

The fear of US interest rate hikes has been there for a long time now. There is a 50:50 probability of rates being increased in September. The rate increase in this calendar year is discounted already by the markets. We have seen in the recent past that the market fears for an event for months and then when the event unfolds, the reaction is in fact positive. It happened for fear of fiscal cliff, QE tapering, Greece elections and and so on.

Chinese data continueto hurt sentiments. How should one read these indicators?

It’s difficult to analyse China. However a positive fallout of China slowing down is the sharp correction in commodity prices, including oil. Having said that, any further sharp devaluation in the yuan can definitely impact India and we should be monitoring that closely. From a global investor’s perspective, the scare of investing in China has increased and that should increase the charm of Indian equities.

Source : http://goo.gl/S0B0zL