Ankit Yadav, Wealth Manager (USA) and Director of Market Maestroo, thinks consumer stocks look very attractive and can create wealth in the long run. "If I have to compound my money for the next 10-15 years, then for sure, consumer stocks will be my top priority," he says in an interview to Sunil Shankar Matkar of Moneycontrol.
Yadav expects the Sensex to be around 2,50,000 to 3,00,000 levels in coming next 10-15 years. "I think the Indian stock market particularly will lead in coming times, compared to the global market. We still have a lot of investors yet to come into this market with rapidly emerging technology. While other markets are looking more efficient, we may witness huge inflows in coming time and we may surprise the world market," he says.
Excerpts from the interview:
What do you think are the key reasons for the market rally? Do you think it will continue till December? What's your take on the Nifty rally?
The most undeviating ground in this rally is that the central interest rates of most countries are sitting at record lows. As we know, interest rates are rare and the stock market generally moves in the opposite direction. Low rates provide liquidity in the system and FIIs make use of it.
The future potential growth of India also looks very strong.
The bull run continues till the FED officially announces the tapering of bonds or rates. The next meeting is in November. So, we will have to wait and watch.
I see the Nifty around 18,000-18,500 this Diwali or by December 2021. Generally, the festive season has had strong performances in the past.
The Midcap and Smallcap indices gained 50 percent and 66 percent in the current year. How should investors approach these segments?
Midcap and smallcap have smaller capitalisation as compared to largecap stocks. Considering these businesses are priced and estimated less than largecaps, they are more volatile and carry more risks, but at the same time, they offer great future rewards. Its upside growth potential is unmatched by large companies.
Also, from a diversification point of view, midcaps and smallcaps are major parts of the portfolio for growth.
But now, as the midcap index and smallcap index both are at their highest levels, investors have to remain cautious and invest carefully in these stocks.
The investors need to invest only in those midcap and smallcap stocks that have strong balance sheet and well-built cash flows and are almost debt free.
These kinds of stocks have the potential to convert themselves into largecaps or blue chip stocks. If investors select such stocks, they can enjoy witnessing their midcap stocks turn into blue chips, but they have to keep one thing in mind, and that is time. Good things and compounding require time. So they have to remain invested in it via SIP.
Aligning the portfolio related to their goals and objectives is the best way to manage smallcaps in the portfolio. Objectives help investors focus on their goals and save them from falling victims of fear and greed.
It also saves investors from taking decisions based on emotions.
So, if investors can add some level of risk with proper management, then valuations matter less and compounding matters most. If one is immensely risk-averse, then one can stick with largecaps. But for diversification, investors must think that 'what a needle can do, a knife doesn't'.
TDo you think it's time to restructure the portfolio? What asset classes investors should have in their portfolios now and what about the ideal allocation in equities?
Yes, traits of a great investor are diversification and rebalancing. Investors need to shift systematically to value from growth. Recently, we have seen value stocks are performing good in the last 3-6 months. That's a clear indication that investors are shifting slowly.
Right now, I think, the investors have to remain invested in equity and at the same time they need to hedge it with cash. Around 50 percent cash of total portfolio is sufficient. It sounds different, but this technique will work when bargain is available in the market. Cash will help investors to buy the stocks at discount and average their purchases quickly if one invest at higher prices. Also, investors can hedge themselves with gold.
Allocation in equity for me, its universal be with 60-65 percent in large capital, 20-25 percent in midcaps, and 10-15 percent in smallcaps, depending on individuals and their risk appetite.
What should be investors approach given the current equity market scenario?
In the current market situation, I think it's tough to beat the market with the Sensex jumping over 50 percent in the last one year, making it very difficult even for wealth managers like US to create alpha from the market. So, the best way to deal with the current situation is through the index funds. Investors can invest in the index systematically till bargain is available. Aggressive investors can invest in stocks, but only in those who have strong balance sheets, adequate cash flows, and low debts. Sticking with the sustainable business is the best option in the current scenario.
What are the sectors looking attractive for investment now and why?
I always have a fondness for consumer stocks. Yes, technology stocks with AI (artificial intelligence) are surging rapidly. But now I think consumer stocks are looking very attractive and can create wealth in the long run. The reason is pretty simple, 'Invest in what you know'. Most consumer stocks we know what they are doing now & we also know what they will be doing after 10 years. For example, Britannia makes biscuits 10-year before, now also are making biscuits & we can say after 10-year also they will be making biscuits.
In short, what I want to say is that consumer stocks are more predictable and more sustainable. If I have to compound my money for the next 10-15 years then for sure consumer stocks will be my top priority stainable earnings due to their continuous demand, therefore they are also crash resistant if we compare it with others. Historically, they are well proven in all the economic cycles.
Why are most of experts saying India is at the beginning of a bull run?
I also expect Sensex to be around 2,50,000 to 3,00,000 in the next 10-15 years. I think the Indian stock market will be a global leader. We still have a lot of investors yet to come into this market with rapidly emerging technology. We are marking above excellent progression. Also, global efficient market theory is working for us.
Still, I think our market is inefficient and we can take advantage of it to generate alpha. While other markets look more efficient, we may witness huge inflows in coming time and may surprise the world market.
Investor must have to be aware of these things & have to remain invested for being part of this future growth story.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.