Auto as a sector is till underpenetrated in India compared to other developed and developing economies and has long runway for growth. With increase in income levels and growth in economy, autos are bound to benefit. The correction in auto stocks gives us an opportunity to accumulate very strong franchises at reasonable valuations, Meenakshi Dawar, Fund Manager, Reliance Mutual Fund said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q: Midcap index rallied reasonably well in recent days, do you think one should start buying stocks in a staggered manner or is it too late?
A: Over last one year a lot of midcaps have corrected and are now available at a reasonable price and provide good entry opportunity. Given the environment is very dynamic and mid-cap companies require far more research than large-cap peers, it is best managed by professionals. A part of investment can go into mid-cap funds, but the investment horizon should be long, and one should maintain discipline while investing.
Q: Auto stocks are sharply off their highs. Is it time to accumulate those stocks?
A: Auto as a sector is till underpenetrated in India compared to other developed and developing economies and has long runway for growth. Just as an example, India car sales is just 15 percent of China car sales. With an increase in income levels and growth in the economy, autos are bound to benefit. The current slowdown in the industry is temporary in nature and can be partly attributed to the slowdown in financing. The correction in auto stocks gives us an opportunity to accumulate very strong franchises at reasonable valuations.
Q: For the last couple of sessions, the theme of the market is to buy beaten down stocks including housing finance companies. Do you see any value in these stocks or still better to stay away?
A: After years of strong growth, housing finance companies are now consolidating. The reason has been low liquidity post issues with select NBFCs. There can be increased regulation on the liability profile and leverage norms for these companies. However, long-term opportunity in the sector remains upbeat and HFCs with a strong retail franchise with good management will only come out stronger in this environment and we will suggest aligning to those companies.
Q: A 24-year old woman with a salary of Rs 25,000 per month wants to invest smartly and build a portfolio (including stocks, gold, bonds, etc.) that will help her garner Rs 1 crore in 15 years. What should be her strategy?
A: It is heartening to see that women at the age of 24 have started to think about saving and investing. As it is said, compounding is the eighth wonder of the world, the sooner you start investing the higher is the wealth you have in your time of need. When one is young, time is on one's side and one can take long term bets. Equities are best positioned for that and as one ages, a part of her portfolio can shift to fixed return products. At early stages, the savings rate should also be high. Since she is a first-time investor she can start with Rs 8000 per month in any largecap or balanced mutual fund and increase her investments every year in line with her annual increase in salary.
Q: What sectors should women in the age of 30-40 years invest in for a bumper return in the next couple of years?
A: Unless a woman has some deep understanding of the sector, taking a call on the sector should be left to the experts. Most of the diversified funds will go overweight or underweight on the sector depending upon their view. There are many sectors that will benefit from the reforms that have happened in the country over the last few years. Banking and financial services, consumer discretionary and engineering stocks, I believe are well poised to benefit in the current environment.
Q: On Women's Day, please suggest five key factors that first-time women investors should keep in mind to build a strong portfolio? Please add a piece of advice on how to avoid making investing mistakes.
A: According to me the five key factors are starting early, disciplined saving, right asset allocation to equities and debt, regular review and investing for the long term. The big investment mistake is getting affected too much by recent events and chasing asset class which has given good return in the last few years and dumping one that hasn't. She should remain focused on her long-term goals and doesn't get carried away by recent momentum.