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IIFL Wealth remains bullish on BFSI segment, sees interesting opportunities in IT

The pharmaceuticals sector has witnessed a sharp correction and quality stocks in the sector are available at compelling valuations.

August 06, 2022 / 01:32 PM IST
Anupama Sharma of IIFL Wealth Management

Anupama Sharma of IIFL Wealth Management

From a long-term perspective, Anupama Sharma of IIFL Wealth Management believes the India growth story is definitely on a strong footing. Today, India stands at the cusp of transformative growth and at the start of an economic super cycle as its external dependencies reduce further and the country becomes increasingly self-reliant, she said.

From a valuation and growth perspective, IIFL Wealth remains bullish on the BFSI segment, especially the high quality BFSI, says the Chartered Accountant who has 22 years of experience in wealth management with a wide range of expertise in the wealth advising division.

Another sector which could provide interesting investing opportunities is the IT sector, Executive Director said. "While stocks in the sector are not cheap, due to ongoing strength in demand, select companies can provide good potential for growth."

Considering the uptrend of last one-and-half-month and several data points, is the market really on a strong footing now or is it just a short-term reversal in the market?

There is no need for the two to be mutually exclusive. After the sharp correction that we witnessed in the first half of the current year, a reversal was imminent. From a long-term perspective, the India growth story is definitely on a strong footing.

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Today, India stands at the cusp of transformative growth and at the start of an economic super cycle as its external dependencies reduce further and the country becomes increasingly self-reliant. Further, a host of factors, including an enabling regulatory environment, thrust on both manufacturing and services, a healthy startup ecosystem, are coming together to create a strong foundation for India’s growth in the coming decade.

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The Indian rupee has shown smart recovery in last few days with the renewal of FIIs buying interest and fall in US dollar index. Is the trend indicating that the currency has bottomed out now and can the currency get back to 75 levels again in coming months?

Generally, when we look at the exchange rate, we tend to only focus on the absolute level. The usual questions among others are - Is it high, is it low, will it strengthen? However, I believe that it is more important to understand whether the INR is competitive – compared to our global trade competitors.

Over the last few months, we have seen the USD appreciate against a host of currencies, the INR being one of them. This stemmed largely from US policy measures. With India on a strong footing, inflation so far under control, and growth projections more or less on track, the INR might appreciate against the USD. But either way, we should see how the INR is performing vis-à-vis other currencies in the trade basket and not simply its value in absolute terms.

Lot of midcaps and smallcaps have come back in action now. Do you think the midcap and smallcap space to outperform largecaps from here-on?

In the long-term, select mid & small cap companies definitely have the potential to deliver robust alpha and outperform large caps. That is the primary appeal of mid & small caps. The macroeconomic environment is changing and the landscape is becoming more fertile in terms of business growth. So, the opportunity is definitely there.

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However, not all mid & small cap companies will be able to capitalise upon this opportunity. Which means that selection becomes a key criteria – the need to identify those mid & small cap companies that have the potential to capitalise upon prevailing opportunities and deliver exponential growth in the long-term.

I have found that painting the entire mid & small cap space with the same brush can be particularly risky – yes, they can deliver great performance but selection in the mid & small cap segment is far more important than in the large-cap space.

Should investors look at re-shuffling of portfolio given the changing market outlook?

Generally, we do not recommend investors to reshuffle their portfolios in response to short-term market movements. The market outlook has not really changed, at least from an asset allocation perspective. Valuations are near long term average. Historically, investors have made reasonable returns over 3 to 5 years from these valuation levels.

We expect volatility to continue over the next 6 to 12 months. An ideal asset allocation strategy would weave in your risk-return criteria and align the same with the long-term market and asset class outlook to create a well-diversified and robust portfolio.

India remains a stock picker's market. We expect a Bottom-up approach to offer a better risk reward to investors. Our view is that investor’s overall portfolio should be balanced between value & growth strategies without any major style bias.

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Has the July auto sales given you the confidence about ongoing rally in the auto space? If yes, is it the time to make fresh buy into the space?

A sharp recovery in auto sales was expected as the assumption was that in the aftermath of the pandemic, once commercial activity resumes a degree of normalcy, a lot of pent-up demand will come to the market. We are now seeing that play out. However, more than the headline numbers, it is important to assess the segments of growth – what is the growth in 2-wheeler, 4-wheelers, and further within the 4-wheeler, what are the kind of cars that are seeing maximum demand. This distinction becomes important due to the fact that there are income disparities, as a result of which, not all customer segments are seeing growth or even stability in income.

Broad-based buying could indicate that overall, there could be growth in the auto sector. However, if the sales fillip is being witnessed only in specific segments while the others remain stationary, then it might not be wise to say that the sector is on its path to recovery. Any fresh buys in the space should be reviewed through this lens.

The market has gained lot of strength in last one-and-half-month with several gap up openings. Where do you want to bet your money now in terms of themes?

From a valuation and growth perspective, we remain bullish on the BFSI segment, especially the high quality BFSI. The pharmaceuticals sector has witnessed a sharp correction and quality stocks in the sector are available at compelling valuations.

Another sector which could provide interesting investing opportunities is the IT sector – while stocks in the sector are not cheap, due to ongoing strength in demand, select companies can provide good potential for growth.

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: Aug 6, 2022 01:32 pm
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