• 2 months ago

Category

🗞
News
Transcript
00:00We are now in conversation with Anand Shah.
00:02He's the head of PMS as well as AIF Investments with ICICI Prudential.
00:07Anand, good morning and thank you so much for joining in.
00:12I want to take stock of the markets firstly at the moment, what you make of them with
00:17the place at that which we are right now and how things could potentially move on from
00:22here on.
00:23Sure.
00:25Good morning.
00:26Thanks for having me here.
00:27I'll give you a little bit of cliched answer that, you know, look, the expectations from
00:32market will have to be far more muted than what we have seen in last few years.
00:39And the reason being, look, when we go back to 2020, we were also, we had quite a few
00:45inefficiencies in the market.
00:47More importantly, we had a subdued five years in the market.
00:51So we were starting from a low point in terms of past returns.
00:55And that generally is very good news for the future returns.
00:58Now today, as we speak, we are sitting on a very hefty profits on the market.
01:03But I think more importantly, we had almost a decade of consumer facing businesses doing
01:10very well and manufacturing and manufacturing allied businesses doing relatively soft growth
01:17and to that extent, market was fairly skewed also.
01:20So not only market was inexpensive, but within the market there were inefficiency where consumer
01:26facing businesses were darlings, they were like at a very high P multiples, price to
01:31book multiples.
01:32In the same time, you had this old economy slash manufacturing businesses were trading
01:39relatively cheap.
01:41Now that inefficiency is also fairly reduced.
01:44The consumer facing business still remain more expensive than manufacturing rightly
01:48so.
01:49But nevertheless, that gap has reduced.
01:51So in that sense, the inefficiencies in the market over the last few years have reduced
01:57and that means that there's so much less money to make in the market incrementally.
02:03Yeah, but that's, you know, not what people are experiencing or seeing Mr. Shah.
02:10They're looking at the primary market.
02:11We've had a bumper listing today.
02:13And there is that excitement growing, more retail investors coming in.
02:18And then you have what SEBI has gone and done, which is try to curb some of that froth, at
02:23least in the derivative segment.
02:24What is the impact for other investment avenues?
02:27You, of course, look at PMS and AIF, but you know, more traditional avenues, equity, cash
02:32market for mutual funds, do you think some of those flows then now come there?
02:38I think that's a good news.
02:40The good news is that across the board, market participants bearing few are cautious.
02:48So you hear fund managers from mutual fund, you hear distributors, you hear even, you
02:54know, when we meet investors, people are fairly cautious.
02:58People are saying, look, we want corrections.
03:01And rightly said that the regulatory is also conscious of the risks that are sort of increasing
03:09by the day as the retail investors become fairly more confident on the market today
03:14than they were four years back.
03:16So I think that's a good news to me, personally.
03:18I believe that makes it much more healthier.
03:21To be very honest, a correction would make the market much more healthier.
03:25Which is what we're possibly seeing now.
03:29Yeah.
03:30So I think in that sense, I'm looking at all these developments more positively than negatively.
03:37We need, having said that the market is not obscenely expensive, there are frothy part
03:43of the market.
03:44And that froth has to be, you know, in a way curved to protect the retail investors who
03:50would otherwise get sucked into those schemes.
03:53So I think all in all, I look at these steps as more positive for the markets, if that
03:59leads to a market correction.
04:00I think that's the key.
04:01A market correction would be more healthy than anything else.
04:04What does a correction look like to you?
04:06Is then my next question.
04:07We're sitting at about a 1% cut right now, and frankly, it's not necessarily a correction.
04:14What is your definition of a correction?
04:17So again, you'll not like me for saying this, but in many, in the 34 years of history that
04:24we have seen, markets used to correct very healthily, used to correct more than 20% every
04:3013th, 14th month, on an average.
04:33And market used to correct almost 10% once, twice, or maybe thrice a year.
04:39That's something is missing.
04:40We are not seeing deep corrections in the market.
04:44Since 2020, we haven't seen a 20% correction, and we have seen only one 10% correction.
04:50So I think we would want to see before committing money convincingly into the markets, maybe
04:57a 10 to 20% correction.
04:59That's something which would make the market that much more safer.
05:02Anand, there are a lot of people who've been waiting for that and then looking at markets
05:06going in the opposite direction and wondering if they missed out.
05:10Is that a risk you're willing to take?
05:12So again, that's the other thing we have been telling everybody.
05:16Don't wait for the market corrections.
05:18You need to have your asset allocation in place.
05:21So don't just sit on cash because you're convinced that the market is going to correct.
05:26Market might correct a year later, one and a half year later also.
05:30My point being that a healthy market would generally tend to correct every now and then.
05:35It'll make it more healthier, but that doesn't mean the market corrections are imminent.
05:40Because if you see last five years, four years, while the markets have done well, corporate
05:45profits have also done very well.
05:47If you see profit to GDP for Nifty 500 has moved from something like 2.6%, 2.4% to 4.8%.
05:56Nifty 500, bad growth CAGR for the last four years in excess of 30%.
06:01So you have tailwinds also.
06:04More importantly, as we see, you have US, you have Europe, and you have China.
06:11Three largest blocks of economy is cutting interest rates together at this point of time.
06:17So it's not imminent that market will correct.
06:19My point being that one needs to be cautious in the market at this point of time and focus
06:24on asset allocation.
06:26Neither side.
06:27You need not be in 100% cash, you need not be in 100% equity.
06:31So Anand, let's assume at the moment that we do, in fact, see not a deep correction
06:37as 20%, maybe about a 5-6% on the benchmarks.
06:40Naturally, your broader markets will see, in that case, about a 15-20% correction.
06:45These are all assumptions.
06:47But there will always be companies out there, or rather sectors out there, for now, which
06:52are on the trend of giving you growth rates of around 15-20%.
06:58What are those areas that, one, either you'd want to remain invested in, or that you'd
07:05potentially see better prices available, and then you'd want to perhaps park your funds
07:11there?
07:12What are those areas that you're keeping an eye on right now?
07:14Sure.
07:15So before I come to this, I think one more additional data point would be good to see
07:19that when we're looking at this number sometime in the third week of September, when market
07:24touched new highs, there were only 95 stocks out of Nifty 500, which were within 5% of
07:29the all-time high.
07:32So the market's already correcting internally.
07:36We have more than 250 stocks in Nifty 500, which are more than 10% down.
07:42Some of the stocks are down more than 30%.
07:46And many of the sectors, like PSU Banks and others, have peaked way back in June.
07:50They have not touched the new highs.
07:52So I think market is, in a way, also correcting while it's touching new highs internally.
07:58Coming back to, I think, what we like today in the market, we still like the manufacturing
08:03again, more bottom-up.
08:05As I said, the inefficiencies at the sector level, at the market level, is not very high
08:11to say that I like this sector.
08:14Bearing banking, where both private banks and PSU Banks, after the near-term consolidation
08:20and underperformance to the market, look broadly okay.
08:24But beyond banking, when we go into other sectors, we'll be more bottom-up.
08:30We like space like manufacturing, manufacturing allied businesses, be it Capco, be it power
08:38utilities, T&D, transmission.
08:42I think everywhere we are seeing bottom-up opportunities to still participate in the
08:46growth.
08:47Within consumption, we've been underweight products, but the services.
08:52So I think there's a clear trend, and that's seen globally.
08:56That as per capita income moves, the consumption pattern moves from products to services.
09:01So you mean like a somato kind of a, or more of a premiumization kind of a situation?
09:10One, when I'm saying services, it includes travel, restaurants, education, but also rightly
09:17said that within the products also, the way we are consuming is changing from unorganized
09:22to organized.
09:23So our portfolios have more of this consumer services business than the products.
09:28Products, I think the penetration has happened.
09:32The larger middle class, the way it's shifting, and we are sort of tracking that into our
09:38portfolios.
09:39How are you feeling about IT right now?
09:41I mean, is this the turning point?
09:44Has it come?
09:45I'm curious to know your view ahead of, we'll of course see the quarterly numbers, but the
09:51rate cut was one big factor that has come in.
09:54We'll know what happens with the US elections, but what's the view on IT?
09:59I think IT, we've been underweight for a while now.
10:01IT had a big bump up, both in growth and valuations during the COVID time, 2020, 2021.
10:10And since then, we've been sort of underweight, knowing or thinking the way we believe that
10:16the growth rates cannot be as good, and the multiples cannot be that high.
10:21But trust me, till then, there's not a single month, not a single day when people have not
10:25asked me about IT.
10:26So to be very honest, IT has never gone out of flavor.
10:30So that's why the smile when I asked you, because I was waiting for that question.
10:34So yes, IT has been strong businesses.
10:38They generate a lot of cash flow.
10:40Unfortunately, they don't have a lot of growth opportunities to invest that cash flow.
10:45So that cash flow is being used to pay out dividends, to a lot of buybacks.
10:50So in that sense, IT sector, to me, is more of a slow to medium growth industry from here
10:58on.
11:00And for that, the valuations continue to remain rich.
11:03So I haven't found valuations attractive enough for IT to plunge in, but otherwise, very,
11:08very strong businesses and balance sheets.
11:10Anand, my question is on a fundamental basis, when you construct a portfolio now, I'm assuming
11:16that you have a portfolio of about 30 stocks.
11:19The first one is that at this point in time, when markets are at where they are right now,
11:24would it be perhaps a little bit more better to have a concentrated portfolio, where you
11:31actually bring down your number of stocks to 20 or 25?
11:34And again, I'm just talking about ballpark numbers.
11:36And secondly, do you think that it would be perhaps a little bit more pertinent?
11:40So for example, if you allocate about 5% to one large cap stock, would you prefer to perhaps
11:46increase that allocation from 5% to 7% towards large caps on an individual basis?
11:52Would you think that would be probably a better way to go about now that markets are at extremely
11:57heady levels?
11:58So, again, I think more important question, it's not 25, 35 or 45 stocks, there is a merit
12:04in diversification, nothing wrong with that, as long as you know those companies are worth
12:11buying.
12:12But to be very honest, the important question is, do you understand the business you're
12:16buying in?
12:17Do you believe or trust the management that's backing that business?
12:22I think we have this BMV model, we look at business management and valuation, we need
12:26all the three in place.
12:27It's not either or.
12:28We need strong businesses which can survive a downturn, can thrive in the good times,
12:34we need managements which are capable and the corporate governance issues are addressed.
12:40And last but not the least, valuations.
12:43I think we are looking at all three.
12:45The number of stocks where we are more convinced today might have reduced, given that some
12:50of the stocks would have become fairly expensive.
12:53And to that extent, maybe we have a little more concentration, but I don't think that's
13:01the advice I would give to anybody and everybody.
13:03No, fair enough.
13:04Yes.
13:05It needs to be well researched.
13:06If you don't have research, then you're better off owning more companies than less.
13:12The concentrated portfolio is much more riskier and needs much more research than otherwise.
13:19Are you over the PSU run-up or do you think that there's some potential there?
13:26I mean, the big theme of say like four, five months ago has sort of fizzled out for now.
13:30Do you see some interest coming back there?
13:33I think corrections have been fairly stark.
13:37Some of them have come into buy zone.
13:39But again, as I said, even within the sectors we like, we are more bottom up.
13:44Ditto for PSU.
13:45I think there are still companies within PSUs which might not have strong fundamentals or
13:52might be very expensive.
13:54So I can't say generally for PSUs, but we own quite a few PSUs in our portfolio.
14:00And we have been sort of incrementally looking at some of the PSUs which we have sold.
14:05Do they have the comeback into a buy zone and continuously evaluating that.
14:09So it's a wait and watch.
14:11Apply those filters carefully, especially right now.
14:14Arun Shah, I think the big takeaway that the cut is yet to come and could be 10 to 20%.
14:20We haven't seen that for a while.
14:21Do we see that or not is the big question.
14:23Thank you so much for joining us today at the NDTV Profit Studios.
14:26Pleasure to have you on.
14:27Same here.

Recommended