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DAILY VOICE | Advise long-term investors not to try timing the market: Gaurav Misra of Mirae Asset

After a strong rally, there can be umpteen reasons for correction, said Gaurav Misra.

August 24, 2020 / 08:19 AM IST

After the strong rally, there can be umpteen reasons for a correction. I will advise long-term investors to not try timing the market. Market will await the nature and strength of growth and earnings revival in the months ahead. Additional government fiscal measures, if any, will also have a bearing on this outcome, Gaurav Misra, Senior Fund Manager- Equity, Mirae Asset Investment Managers India, said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpt:

Q)  What is your take on the 'transparent taxation' platform announcement and how will it impact markets and taxpayers?

A) Digitization is the way forward across many facets of activity.  The introduction of faceless e-assessments and faceless appeals is another step in that direction.

Activities with reduced human interface and lower subjectivity would be welcome to both the taxpayer and the authorities.

However, the success of this will require proper execution and a strong IT backbone. Actual taxpayers in India is still a very low number. I do not see any short-term impact on the market.

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Q) Equity mutual funds see negative inflows for the first time in over four years. What could be leading to the redemption pressure in MF? Does it look like investors are cashing out or is it the liquidity needs which investors have to deal with due to job losses etc.? What are your views?

A) After the ongoing rally, there will be a combination of factors at play for the net outflows (ex of arbitrage funds) of the last 2 months.

These could include fund requirements by small/large investors for other parts of their business which might have been cash strapped, profit-booking, a modicum of job uncertainty/losses, some realignment within market caps, and some realignment to alternate assets.

These adjustments are to be expected and will happen along the way, especially in such unprecedented times.

Q) What is your take on the markets? Do you think we could see some selling pressure when Vaccine actually arrives? It will be a classic case of buy on rumors and sell on news?

A) After the strong rally, there can be umpteen reasons for a correction. I will advise long-term investors to not try timing the market.

Markets will await the nature and strength of growth and earnings revival in the months ahead. Additional government fiscal measures, if any, will also have a bearing on this outcome.  Technical factors like global liquidity could prevent very steep corrections.

I do not know if a comprehensively effective vaccine is imminent.  More than the vaccine, the mutation of coronavirus will be more important.

The virus has been in the human system for quite a while now. While it remains highly contagious one hopes it does not mutate into a more virulent form. The outlook could change for worse if the virus turns more lethal.

Q) Which is the biggest risk for equity markets globally - is it the trade war between US and China, or the outcome of the US Presidential elections?

A) Notwithstanding the outcome of the US Presidential elections, I feel there is bipartisan support in the US on its trade issues with China. So, unfortunately, geopolitical and the drag on account of tariff issues will linger.

More than the US and the rest of the world, Chinese actions – of the sort we have been seeing during the pandemic, will determine how bad things can become.

While Mr Trump’s approach towards the market is known, the Democrat option is a centrist and not market unfriendly either.  I do not think there should be a concern on that count. Of course, the working equation between the two parties will remain important.

The biggest risk, in my view, is if all the global central bank and government effort post-COVID-19 is unsuccessful.

If the desired growth does not come by, if inflation surges or if there are other unintended consequences, there could be a transmission of that global weakness to the Indian markets as well.

Q) What is your outlook on precious metals as a sector? Recently, it has got enough attention from D-Street. What is fuelling the rally in metals, and are there any top bets which investors can bet on?

A) My outlook on precious metals such as gold and silver is neutral and that investors should keep exposure to this asset as a hedge only.

The recent surge in gold and silver has possibly been driven by a combination of factors such as an increasing global stock of negative yields, USD weakness, uncertainty on growth, uncertainty/fear on account of COVID/inflation revival, rising government indebtedness, central bank gold purchase, etc. The momentum could sustain for some more time.

The recent rally in base metals is driven by the strong pick up in activity in China. Post-COVID, Government measures in China have helped drive up activity.

There are large infrastructure projects on the anvil and even real estate is doing well in China. This has driven the rally in global base metal prices. Besides steel, the strength in copper suggests that the global/Chinese industrial outlook is robust.

Q) What is your take on MNC stocks? Do you think they are better placed in this pandemic? If yes, which one tops your list any why?

A) Stocks under MNC ownership is a very broad category. It encompasses businesses from passenger vehicle manufacturers, auto components, engineering, pharmaceuticals to consumer staples, and discretionary products.

MNCs are normally expected to be well run, with good management and strong balance sheets. Many of these firms have been operating for many decades in India, will be strong in their respective product market, and fairly resilient in the current environment.

Thus, the MNC bucket could be one area to identify good ideas. Beyond that valuations have to be factored in and it will be a bottom-up story.

Q) FIIs are net positive so far in the month of August in the cash segment of equity markets as compared to DIIs who are net sellers? Does it look like investors back home are getting the edge at higher levels? What are your views?

A) Yes, FII buying has picked up strongly in August and is already at the levels of inflow of the preceding two months.

DII selling might have to do with the net redemptions in equity AUM in the recent period and maybe some cash calls after the recent rally. At Mirae Asset we do not take cash calls.

Q) Prime Minister Modi emphasized on Infra, fiber optics, cybersecurity in his speech on the occasion of Independence Day. What are your takeaways and how will it impact these sectors?

A) Government plans on infrastructure over the next 5 years had been communicated in November last year. Reiteration of the same is important as the Government has to contribute a meaningful share of the expenditure.

It is important that, despite GDP de-growth and lower than projected tax collections, the government sustain its spending on infrastructure. Infrastructure spend has amongst the highest multiplier benefits to the economy.

Fiber optic roll-out under the Bharat net program has been underway for the past few years as well. These initiatives could aid in productivity improvement across agriculture, healthcare, education, and trade.

Cybersecurity has gained even more importance post the pandemic, given the shift to WFH. There will be select business models across these domains which might benefit.  All in all, if implemented well, these measures will enhance productivity levels of the economy in the medium term.

Disclaimer: The views and investment tips expressed by 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.
Kshitij Anand is the Editor Markets at Moneycontrol.
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