'Investors with long-term horizon can look at increasing allocation in small & midcaps'

Q) What should be the investment strategy, especially at a time when the market is trading at record highs?

A) The focus should always be on asset allocation. For goals that are longer-term, we continue to maintain equity as a preferred vehicle. For shorter duration goals, asset classes like debt are more suitable.

We also recommend investors to evaluate dynamic funds or balanced advantage funds, which vary their equity and debt allocation basis valuation, sentiment and overall opportunities in various asset classes.

Q) Auto sales continue to remain muted for November, but some experts feel that a recovery is underway. Do you agree?

A) Given that India transitions to BS-VI, the next few months will be entirely driven by how auto companies provide sops to entice pre-buying by way of higher discounts or more features.

Given this, we think auto-sector volumes may improve sequentially in the near term. However, it is only post this phase that we will get a better fix to understand the auto cycle and genuine demand.

Q) Mid and small-caps have seen some recovery in the last few months. Do you think smart money has started moving in some of the beaten-down names in the broader markets space?

A) From an asset allocation perspective, we recommend increasing allocation, from a longer-term horizon to mid and small-caps where valuations are relatively cheaper.

Q) The September quarter was a mixed bag but largely on the positive side. How is the December quarter likely to pan out? Do you see more pain for India Inc?

A) We expect earnings to be slow, but improving trajectory, especially big profit numbers from corporate banks as they emerge from previous NPA cycle can help, even as some other sectors like auto, consumer, PSU sectors see some slowdown due to weak economic growth.

Q) Do you think the telecom sector has bottomed out and investors with a long-term horizon should adopt buy on dips approach?

A) Pricing discipline seems to emerge in this sector. However, the quantum of hikes is very steep and hence players may want to see how customers respond to the hikes before a further pricing action.

While the heightened competitive phase may be over, we think telcos will continue to make a suboptimal return on capital deployed even after these hikes. We remain selectively positioned in this space.

Q) Which are the sectors likely to outperform or generate alpha as the economy turnarounds and why?

A) We think investment and financial sectors will outperform as the economy turns around.

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