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DAILY VOICE | Budget 2021 could be disappointing, bet on mid & smallcaps: Naveen Kulkarni of Axis Securities

Kulkarni, who has over 10 years of experience in the capital market, says he would prefer mid and small-caps in 2021.

January 10, 2021 / 12:04 PM IST

Naveen Kulkarni, Chief Investment Officer, Axis Securities, is of the view that the year 2021 will be an exciting year as there will be multiple triggers for the markets.

In an interview to Moneycontrol’s Kshitij Anand, Kulkarni, who has over 10 years of experience in the capital market, said he prefers mid and small-caps in 2021. Edited excerpts:

Q) The year 2020, which most of us thought could go down as a black year for equity markets, has, in fact, turned out to be a year of new trends, fresh record highs, and a whole new meaning to life. What are your views for 2021?

A) The year 2021 will be an exciting year, as there will be multiple triggers for the markets. Rolling out of vaccination, economic revival, and the sustenance of liquidity in the system should buoy the markets. The market seems to be well set to scale new highs in 2021.

Q) Define 2020 in one word and why?

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A) It is rather difficult to describe 2020 in a word. However, one way to describe the experience of 2020 is ‘humbling’. 2020 had been a challenging year and it has shown the futility of our excesses.

The year has been one where the need for community and trust has increased much more. So, the experience of 2020 has been very humbling for mankind.

Q) What is your outlook on earnings for the year 2021?

A) Our expectations of FY22 or 2021 are of a very strong comeback. As the economy revives, earnings recovery will be very sharp. We expect Nifty50 earnings to rise by 33 percent in FY22.

Q) What are your expectations from Budget 2021? FM promised it to be a vibrant budget and a lot of policies to support the economy have already been rolled out. So, what could cheer markets?

A) Budget events have more often disappointed the equity markets. The fiscal situation for the government is not particularly encouraging. In this scenario, our expectations from the Budget are not very high.

We would be very positively surprised if there is something substantial for the equity markets in the Budget.

Q) What is the feedback that you are getting from FIIs/HNIs for India?

A) The feedback continues to be mixed. HNIs are cautious and FIIs have continued to invest because of the flow of liquidity in the markets.

Q) Bitcon outperformed most of the asset classes. Do you think it is time for investors to take cryptocurrency seriously and add some percentage to their portfolio?

A) Bitcoins and alternate assets continue to be highly risky assets. The technological advantage of blockchains is clear but the intrinsic value of such assets is difficult to assess.

Nonetheless, in an era of so much liquidity being pumped by the central banks, bitcoins do hold an interesting store of value considering they are not dependent on any central bank and will help in diversifying assets.

Bitcoins as an asset class are useful for matured investor and will not work for most as bitcoins in the overall asset allocation should still be a small portion.

Q) Any new trends in terms of sectors which you are seeing that could last for the next couple of years?

A) Recently, the PSUs have seen buybacks and commodities have done very well. So, there is value in both these spaces and could deliver solid returns over the next two years.

Q) Your key learnings from the year 2020? What would you advise investors to follow in the coming year?

A) 2020 has taught most of us on the aspects of efficiency and management of costs. Having a digital model is the most critical learning from 2020 and companies focusing on long-term digital models will create value for shareholders. Also, sustainability has become even more important from a long term point of view.

Q) Value or beta – what would be more popular in 2021 and why?

A) Value and Beta are quite similar in India. Value companies tend to have a higher beta in the Indian context. Value has outperformed other styles in 2020. There is a high chance that it will continue to outperform in 2021 also.

Q) What would you prefer large-caps or mid, and smallcaps in the year 2021?

A) Mid and small-caps will be preferred in 2021. We believe that if market volatility remains in the manageable zone, then mid and small caps will outperform the market in 2021.

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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