I think Atmanirbhar Bharat is a great initiative and will definitely give a strong and much-needed push to the manufacturing sector. However, the important thing to keep in mind is it will not happen overnight and will take a few years, Manish Jain, Fund Manager - Coffee Can PMS at Ambit Asset Management said in an interview to Moneycontrol's Sunil Shankar Matkar.
Edited excerpts:
Q: How should be the allocation mix in equity now considering a sharp rally in mid and small caps? Should fund managers increase bet on these stocks or should play safe with higher allocation to largecap stocks?
In the last couple of months, there has undoubtedly been a risk on sentiment in the markets. The midcap and smallcap rally is testimony to the same. Given the negative surprise as far as GDP growth is concerned, the localised lockdowns prevailing and valuations being as rich as they are, a short term correction is not ruled out.
However, I do believe that from a long-term perspective, we are on the right path and fundamentals of the economy remain strong. We expect GDP growth to revert to mid to high single digits in FY22. Thus, investing in equities remains a good idea if you are a long term investor. If you have a three-year investment horizon, then there is money to be made. My advice would be to be more quality-conscious and be market cap-agnostic. The company should be a market leader with good corporate governance practices.
Q: As we are focussing more on Atmanirbhar Bharat, what are sectors one should invest in as a part of equity portfolio and why?
I think this is a great initiative and will definitely give a strong and much needed push to the manufacturing sector. However, the important thing to keep in mind is it will not happen overnight and will take a few years. Hence, with that timeframe in mind, I would be very positive on Autos, Financials, Pharma and Consumption.
Q: Lot of brokerages are tying up with global investing firms to offer their customers an investment opportunity in global stocks like Google, Amazon, Apple etc. What are your thoughts on this theme and how much percentage one should allocate to global stocks in a portfolio?
Well, it is always a great idea to invest in global names, provided they fit your investment framework. The important thing is to do your homework properly and access the risk-reward carefully, because you carry currency risk over and above the equity risk and country risk. The allocation would depend on your portfolio size and risk appetite.
Q: What are risks one should consider before investing in global stocks? Also what are biggest risks ahead on the global as well as domestic front given more than 50 percent rally from March lows in equity?
Equity markets globally, both developed and emerging markets, have witnessed a strong rally. While it may not make too much sense looking at the current economic condition, one should remember that it is always forward looking. Markets have a way to factor in events quite in advance. The key risks are global commodity prices, currency and growth outlook.
Q: Do you think the market has to correct now given the over 55 percent rally seen from March lows or will the market continue its uptrend, why?
As I mentioned earlier, in the near-term, yes, it is quite possible that a minor correction may occur, but rather than getting perturbed, I would use it as an opportunity to add stocks to the portfolio.
Q: Auto has seen a sharp run up in last few months following monthly sales data amid unlock process and June quarter numbers. Should one invest in auto now or wait for correction, why?
I am more positive on the 2-wheeler sector than the 4-wheeler sector and believe that it would be the key beneficiary of the rural demand revival. The time to invest is now and hold for a 2-year period and add on at every correction (if any).
Q: FIIs' monthly inflow in August 2020 has been the highest in last two decades? What does it indicate given the current scenario and government measures? And what are those sectors/segments getting more FII investment?
Well, for one thing, equities across the board has been getting a higher allocation more so because of lack of alternatives. It also reflects the market's forward looking stance. It is also a reflection of the government policies, the confidence that our economy shall bounce back in FY22 and that things are on the right path.
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