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Daily Voice | It's time to start investing lumpsum into markets, says Aashish Somaiyaa of WhiteOak Capital

The most attractive would be private sector banks given that credit offtake is improving, NPA (non-performing assets) cycle has turned and corporate balance sheets are also healthy.

May 18, 2022 / 08:55 AM IST

With more than 12 percent corrections just behind us, this is time to start investing in lumpsum and there are possibilities of good inflows at these levels, but it would be foolhardy to assume that the market sentiment would not impact the investors' mood.

Markets have quickly factored in most of the tightening, argues Aashish P Somaiyaa, CEO at WhiteOak Capital Asset Management, while sharing his views on the market trends during an interaction with Moneycontrol.

"To make money, one needs to be counter-cyclical but exaggerated moves in the markets evoke emotional reaction in investors, that’s natural. Humans are not logical, they are psychological as is written by Rory Sutherland in his book, Alchemy: The Surprising Power of Ideas That Don't Make Sense," he says.

Excerpts from the interaction:

How do you approach the market after it rebounded from over 12 percent correction in the last one-and-a-half-months?

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Around 5-10 percent correction from any level can never be ruled out and that is possible even now. Having said so, what matters is that the current reaction in the market seems to be as a result of serious of bad news emanating from beyond our borders.

It started with China tech meltdown due to political interference in that space, followed by a US tech meltdown and further reaction to tapering in the US. This was followed by the war and rising oil, metal and commodity prices, and global fear of inflation. In anticipation, yields have globally started to harden, the USD has appreciated and currencies have depreciated. This is a significant adjustment in global markets.

But domestic economic conditions, India's external macro and corporate performance seem to be strong. We are just seeing the beginning of a new economic cycle as also manufacturing and export resurgence in India.

Keeping past experiences of global meltdown and related FPI selling and our local conditions in mind, one can say the market is now getting into an attractive zone and opportunities are there for investors to enter and make good returns over next 12-24 months.

Do you expect any slowdown in domestic inflows to markets as there has been too much volatility in the market for seven months now?

One can't wish away the fact that while flows support markets, market performance also encourages or discourages flows from investors. I won't be surprised if sustained negativity in the markets starts to take a toll on retail investors' confidence.

Investors usually do not redeem or sell when investments are under water, redemptions tend to happen when there is a recovery and capital is restored above par value after a significant fall. But yes, inflows - not SIP inflows but discretionary inflows, can slow down.

This is actually a time to start investing lumpsum into the markets and one hopes for good inflows at these levels, but it would be foolhardy to assume that market sentiment would not impact investor mood. To make money one needs to be counter-cyclical but exaggerated moves in the markets evoke emotional reaction in investors, that’s natural.

Do you think the pain of inflation and rate hikes by the central banks is yet to be digested by the equity market?

It is early to say this because we have to see how inflation trajectory plays out in the next six months. But markets do seem to have factored in most of the tightening already very quickly.

As there is relentless selling pressure, what are those pockets that are looking attractive now?

The most attractive would be private sector banks given that credit offtake is improving, NPA (non-performing assets) cycle has turned and corporate balance sheets are also healthy.

Having said so, WhiteOak is not a sectoral or top down investor and given the sharpness of the recent fall in last 30 days one can say there are pockets of value emerging across the spectrum.

Is it time to be bullish on the IT space that fell more than 19 percent in the last one-and-a-half months?

Tech as a sector is now vast and hence one should avoid painting all the tech with the same brush. We see it as the traditional tech as in IT/ITES companies, the innovation leaders i.e. specialised mid-cap IT, product and services companies and lastly the digital leaders or new age tech. Literally everything has declined sharply and the fall started since second half of 2021 in sympathy with what happened in China tech, US tech and global markets. That itself says a lot.

One needs to be discerning because the reasons for Indian IT businesses seeing higher growth is very different from the fall in NASDAQ companies or equities in general and even in the new age businesses the stage of evolution in India and its consumer markets is very different from what it is in the Western world. In fact this sharp fall in markets and valuations might just end up creating a longer runway with less competition for incumbents or early leaders in every sub-sector of new age digital tech and block competition and funding for some time.

Disclaimer: The views and investment tips expressed by investment 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.
Sunil Shankar Matkar
first published: May 18, 2022 08:55 am
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