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Daily Voice | These 7 themes must be part of your portfolio this Diwali, as per Rahul Bhuskute of Bharti AXA

Rahul Bhuskute of Bharti AXA believes we are a period where there will be a good steady state, multi-year growth in the Indian economy. This will potentially lead to a good upside in the equity markets as well.

October 27, 2021 / 07:52 AM IST

Rahul Bhuskute, chief investment officer at Bharti AXA Life Insurance, who is a tenured investment professional with over two decades of diverse and extensive experience, expects good economic growth in FY22 and FY23, which will be reflected in a strong equity market.

He feels the markets may not deliver outsized returns going ahead but may still see steady growth, and advises investors to stay invested across market cycles to achieve long-term financial goals.

“We remain bullish on the themes of global recovery, digitization, higher IT spending, domestic consumption pickup, higher spending on infrastructure and private capex, real estate and the China-plus-one strategy. Companies that benefit from these themes should form part of an investors' portfolio for the next two to three years,” he said.

What is your advice to investors in the current market scenario where the enormous wealth has already been created?

Investors need to be disciplined about their approach to investing and should invest in equity with a long-term time period in mind. The recent upswing in the equity markets have come about after about a couple of years of anaemic returns and is reflective of a recovery in economic growth and corporate profitability.

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Markets discount future earnings prospects and we believe that there could be a period of strong earnings from corporate India over the next two to three years. Markets may not deliver runaway returns from here on, however, we may still witness a steady growth in the equity markets. We hence recommend investors stay invested across market cycles in order to achieve their long-term financial goals.

For the first time systematic investment plan (SIP) flow crossed the Rs 10,000-crore mark in September 2021. Do you think the SIP flow can cross Rs 20,000 crore in a month in the coming year?

The Indian mutual fund and investment industry is highly underpenetrated compared to other countries. As more individuals understand the importance of savings, and investing these savings to realize their future goals, the mutual fund industry will grow meaningfully. As the penetration of the mutual fund industry increases strongly every year, we will see an increase in the monthly SIP flows. It is difficult to put a number to this. However, given the size of the Indian opportunity, it is definitely possible to cross Rs 20,000 per month in a few years.

The market so far has given more than 40 percent returns from last Diwali. Do you expect similar returns by Diwali 2022 and what are the driving factors?

We expect good economic growth in FY22 and FY23 and this will be reflected in a strong equity market. Banking and financial services, industrials, discretionary and IT are sectors to bank on. Several lead indicators had turned positive in August and have been stable in September, while management commentaries continue to remain positive across quarterly calls. This augurs well for growth in FY22 and FY23.

What are the risk factors (global as well as domestic) that can spoil the market sentiment, especially when the market is hoping for strong economic and corporate numbers in coming quarters?

The biggest risk factor that is currently facing Indian corporates is high commodity prices. Crude oil, metals and other commodities have seen unprecedented levels of inflation in the past few quarters and this has impacted the profitability of companies. Global freight congestion and supply chain bottlenecks are further exacerbating the cost curves for corporates. A potential third wave (of the Covid-19 pandemic) may also meaningfully hamper the nascent economic recovery.

Which sectors have to be in a portfolio this Diwali with the hope that can create wealth in the next couple of years, and why?

We remain bullish on the themes of global recovery, digitization, higher IT spending, domestic consumption pickup, higher spending on infrastructure and private capex, real estate and the China-plus-one strategy. Companies that benefit from these themes should form part of an investor’s portfolio for the next two to three years.

Do you strongly believe that we are in a multi-year bull run and multi-year growth story? Can you elaborate?

We believe we are in a period where there will be a good, steady multi-year growth in the Indian economy. This will potentially lead to a good upside in the equity markets as well. There will, however, be a fair amount of volatility this year, driven by commodity price fluctuations, inflation trajectory and Fed (US Federal Reserve) tapering. We would use this volatility to build positions in the market as we expect the growth story for India to accelerate over the next two to three years.

What is your reading on the September quarter earnings that have been announced so far? What are the top five companies that beat your earnings expectations by a wide margin and missed sharply, respectively, and are you bullish on those stocks?

The September quarter earnings have started on a mixed note, with strong numbers from sectors like IT and financials and muted profitability from sectors like consumer durables and cement. We continue to like the IT and financials pack. Several companies have indicated price hikes over the next few months to pass on their high cost of production, and this could reverse the fall in margins seen in the recent quarter, underpinning our positive outlook on these sectors.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that 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: Oct 27, 2021 07:52 am

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