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Money-making opportunities in cyclical, financial, defensives: Amit B Ganatra of HDFC AMC

Gold can act as a hedge against unforeseen events, in addition to being a hedge against inflation and currency depreciation, says Ganatra

September 02, 2021 / 09:53 AM IST

Amit B Ganatra, Senior Fund Manager, HDFC Asset Management Company Limited, sees good opportunities in domestic cyclical sectors like financials and industrials along with defensive sectors like utilities.

Ganatra has over 17 years of experience in equity research, including fund management. Before joining HDFC Asset Management Company Ltd, he worked with Invesco AMC and DBS Cholamandalam AMC.

In an interview to Moneycontrol’s Kshitij Anand, Ganatra says from a long-term perspective, returns from Indian equities should be largely in line with long-term earnings growth. Edited excerpts:

The market seems to be on steroids as the Nifty has gone past 17,000 and the Sensex 57,000. What are your views—time to turn cautious or ride the euphoria?

After a sharp rally in the market over the last one year, valuations across largecaps, midcaps, and smallcaps have rerated. As of July 31, 2021, Nifty 50 was trading at a 19.4 FY23E price-to-earnings ratio.

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Further, 10 year and 15-year CAGR returns of Nifty are now closer to the nominal GDP growth. Overall, valuations in the market are no longer cheap and call for caution but increasing vaccination coverage, pent-up demand recovery, supportive monetary and fiscal policies, buoyancy in tax collections, and a healthy earnings outlook create a constructive environment for equities as an asset class.

Investors should participate in equities but should respect asset allocation. While markets hold promise over the medium to long term, one should moderate return expectations in line with the expected growth in the nominal GDP.

In such times, sound asset allocation would help to mitigate the volatility in an investor’s portfolio.

The US Fed’s minutes caused a knee-jerk reaction on D-Street in the week gone by. The world has got used to easy money now. How will it impact equity markets across the globe, including India?

Supportive monetary and fiscal policies have avoided the worst and also aided faster recovery. However, benign liquidity conditions and low-interest rates have also to some extent aided a sharp rally in global equities.

Once economic conditions normalise, one would expect gradual unwinding of loose monetary and fiscal policies. However, any premature reversal in the stance could lead to a sharp movement in interest rates, which, in turn, could lead to volatility in global equity and debt markets.

From a long-term perspective, return from Indian equities should be largely in line with the long-term earnings growth.

Where are the money-making opportunities in this market? Do you see value in any other asset class?

There are good opportunities in domestic cyclical sectors like financials, industrials, etc, which trade at attractive valuations, along with defensive sectors like utilities.

Gold can act as a hedge against unforeseen events, in addition to being a hedge against inflation and currency depreciation.

Given the fact that we are trading in unchartered territory, should investors consider rebalancing their portfolio? What is the ideal portfolio allocation? Tell us something about the investment strategy of HDFC Multi-Asset Fund?

In today’s volatile and uncertain world, asset allocation is critical for any investor as it not only ensures equity participation but also aims to protect the downside by exposure to other asset classes namely debt and gold.

HDFC Multi-Asset Fund (“the Scheme”) adopts a model-driven approach for asset allocation. The model indicates the percentage of unhedged equity allocation based on valuations.

Equity allocation (hedged + unhedged) ranges between 65 percent and 80 percent of total assets, out of which, unhedged equity allocation indicated by the model is between 40 percent and 80 percent of total assets.

As of July 31, 2021, the scheme’s portfolio had equity exposure of 65.5 percent of total assets, out of which, unhedged equity exposure was around 53.8 percent of the total assets.

The scheme also had around 10 percent exposure to gold- related instruments and around 21 percent exposure to debt (including cash/cash equivalents and net current assets).

What is your investment mantra before picking up stock for investment?

HDFC Multi-Asset Fund focuses on building a diversified portfolio of dominant companies with strong balance sheets and, at present, has a large-cap bias.

Disclaimer: The views and investment tips expressed by 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.

 
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Sep 2, 2021 09:53 am

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