Daily Voice | Domestic consumption surge, not India-US trade deal, seen as real market trigger: Samco MF CIO

When we look at the management commentary, sector wise-granularly, the collective output just becomes a confusing noise within the sectors, where the companies have divergent voices. Hence, we believe in objective data analysis of the numbers and the texts to arrive at actionable ideas to implement in the portfolios. But in general, the numbers are in line, but the valuations are stretched and priced to perfection, and hence the caution.

Have you made significant changes to your earnings estimates for Q4, especially after the Q2 results and the festive demand-led growth?

We do not follow predictive models but respond to the actual outcomes given by the verdict of Mr Market. This, accordingly, is the objective way of analyzing and responding to the outcomes delivered by the companies.

As far as festive demand is concerned, it is only a one-off type of event and will be largely ignored, but the sustainability of the same going forward, post this quarter, will be closely monitored for alerts.

Do you think the market is unlikely to witness strong upward traction until the uncertainty surrounding the India–US trade deal is resolved?

India-US trade tariff deal will not only be a real big trigger for upward traction, as the effects are now digested by the markets either way. The real trigger will be how domestic consumption behaves and accelerates post the GST and income tax rate cuts. Indian households are expected to continue their spending spree and, at the same time, keep the liquidity tap open for the capital markets to continue their upward trajectory.

If either of these two drivers of current bull market jitters, the outcome will be negative surprise, but so far, it’s so good, let’s see what’s stored in the future.

Are you currently underweight on FMCG and consumer goods?

Yes, we are underweight on FMCG and selectively underweight on consumer goods because first, they are not in momentum, and we follow a momentum style of investing for identifying and selecting stocks and sectors.

Sectors that are in momentum currently are hospitals, AMCs, exchanges, wires and cables, banks, etc. We closely monitor the portfolio and if for any reason, the stocks enter into an anti-momentum or slow-down phase, we either hedge or rebalance to a stronger company.

What is your view on the recent consultation paper regarding the mutual fund fee structure? Who stands to benefit the most from these proposed changes?

SEBI has always acted in the best interests of investors and in the interest of capital markets in general. Given the size and scale the mutual fund industry has reached, these proposed steps seem logical.

Do you expect to see stronger traction in the midcap and small cap segments compared to large caps in the coming quarters?

Small caps and Midcaps are undergoing consolidation both time and price correction; however, large caps still do have some traction. Nonetheless, there is no momentum in the market as far as small caps and mid-caps are concerned relative to their own records.

In general, momentum as a factor of investing is down by high single digits on a yearly time frame, when looked at from Nifty50’s perspective. It is in such scenarios that one should start allocating slowly towards momentum factors when it is underperforming.

In this light, one should look at small-caps and mid-caps for investment with a long horizon. In this backdrop, we at Samco AMC are launching a new fund offering (NFO) next week, which will be India’s first Momentum-based Small-cap Fund to capture emerging growth opportunities.

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