Having a well-diversified portfolio of stocks across domestic and export sectors with high balance sheet quality and high cash flow conversion is the best way to manage risk in this environment, Hiren Ved, Director & Chief Investment Officer, Alchemy Capital Management, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Bulls have suddenly lost their grip on D-Street in September. What are the factors that are weighing on equity markets?
A) The markets had rallied strongly after the post-COVID collapse on the back of higher liquidity and the gradual unlock which led to a steady improvement in the economic activity.
It was inevitable that there would be a pause for breath and September was largely that. The near-term outlook for the market will be driven by the pace at which the economy opens up, the trend in aggregate consumer demand, the overall liquidity situation, and the earnings announcements and management commentary in the Q2 results.
Q) Are there any sectors where you are cutting your exposure after the recent rally?
A) We are focusing on keeping our portfolio well-diversified and continue to be cautious on banks.
Q) We have seen a flurry of IPOs in September. Which are the factors that one should consider while putting their money in an IPO?
A) We generally stay away from IPOs as we prefer companies with a visible track record. Investors should closely analyse the risks, especially disclosures about the managements when investing in IPOs.
Also, be careful of companies in new sectors where there are no readily-available valuation benchmarks.
Q) Any big themes which can make a portfolio COVID-proof or insulated from external shocks, and why?
A) Having a well-diversified portfolio of stocks across domestic and export sectors with high balance sheet quality and high cash flow conversion is the best way to manage risk in this environment.
Also, expect increased volatility so avoid high-beta stocks that could be vulnerable to sudden external shocks, COVID or otherwise.
Q) COVID might go or fade out after a vaccine but scars on the economy will take time to heal? What are our views – do think there is a bigger problem which the Street is not seeing?
A) The street is very cognizant of the macro risks and that is one of the reasons for the asymmetric market performance. While the broader macro may suffer, easy liquidity does provide some support to the markets.
Also, larger companies may benefit in terms of market share and some of that is also getting built-in. In some cases, their pandemic will bring about fundamental changes in behaviour and that impacts companies asymmetrically.
There will continue to be select opportunities even when the economy is weak. Though in the short to medium term, market share gains in strong companies will provide tailwinds, for markets to deliver sustainable returns, it is very important for both demand and the investment cycle to kick in.
Q) After the recent fall with Nifty trading below 11K – do you think it has become ripe for investing or investors should look out for lower levels before taking a plunge?
A) The best way to invest is to drip feed – invest small amounts over a period of time. Timing the market is a dangerous strategy that could backfire.
Investors waiting on the sidelines should slowly deploy cash in a systematic manner, preferably with the help of expert professionals.Disclaimer
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