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These two key factors will determine market direction going ahead, says Shibani Kurian of Kotak Mahindra AMC

As the pace of economic recovery picks up, we believe that the market movement would continue to get more broad-based in nature as compared to the polarised market movement in the last three years.

March 09, 2021 / 01:51 PM IST

Shibani Kurian of Kotak Mahindra Asset Management Company (AMC) feels after a sharp run up, it would be normal to witness some volatility and the rise in US bond yields along with the rise in oil prices have had that impact on markets over the last few days.

"We believe that the current state of rising yields is similar to episodes in history where growth recovery was the key driver for rising yields. During these episodes, equities tend to deliver positive returns," she said in an interview to Moneycontrol's Sunil Shankar Matkar.

The Senior EVP, Fund Manager & Head – Equity Research at Kotak Mahindra AMC, believes that corporate earnings and economic recovery would be the two key factors among others determining the direction of the markets.

Edited excerpts-

Q What is your advice for women who want to enter equity markets?

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First and foremost believe in yourself; there is no shortcut to success. Hence, research, research and research. There is a saying that revenue or topline is vanity, bottomline is sanity and cash in the bank is the reality – this is the principle on which we evaluate stocks. Focus more on the balance sheet, cash flows and return ratios than just headline valuations. Management of risk is as important as hunting for upsides; hence the focus on risk adjusted returns is the key - always keep an eye on downside risks. ESG (Environment, Social and Governance factors) is the new reality; focus on sustainable returns rather than just short-term upsides.

Q Do you feel we need more women participation in the market like we have had in past year?

We definitely do need more women participation in equity markets. Various reports seem to suggest that only 11 percent of US fund managers (FMs) are women down from 13.8 percent in 2,000; the number of funds have expanded but the figure has come down.

In India, the figures are even lower. Diversity and inclusion is going to be critical for the longevity and the growth of any economy and industry and nation; more and more focus is shifting towards sustainable growth – and it is similar in case of capital markets.

Many studies have also shown that women fund managers tend to outperform men. Here, I believe that it is not just about risk management, it is about decision-making, diversity of thought and approach. I believe multi-tasking comes naturally to women and the ability to evaluate different situations and make decisions is what sets women FMs apart from the rest. I myself wear many hats, that of a banking analyst, Head of Research, Equity Fund Manager and ESG coordinator for the firm.

Q What are the challenges and opportunities available for women in equity market right now?

Equity market opportunities are immense and the penetration of Mutual funds MFs) in India is still very low. In the world of equity investments, the earlier you start saving and investing the better it is. Investing at an early stage of life lets you enjoy the benefits of two powerful strategies - rupee cost averaging and the power of compounding.

Remember, time in the market is far more important than timing the market. While approaching the markets, it is easy to get carried away. Hence, the key is to remain disciplined and systematic in one’s approach to investments. One great tool to get exposure to the equity markets is through the SIP or systematic Investment plan route.

SIPs is that very route which helps in adopting a disciplined approach to investing. And you can start with as little as Rs 100 a month.

SIPs are highly flexible. If your savings increase in the future, you have the option to increase the SIP amount or even start a new SIP in the same mutual fund scheme or any other scheme of your choice.

Q Is it time to be cautious now considering the volatility in the equity market for last three weeks? Also, do we have to really worry about rising bond yields and dollar index?

Equity markets have had a great run over the last six months or so. After a sharp run up, it would be normal to witness some volatility and the rise in US bond yields along with the rise in oil prices have had that impact on markets over the last few days. Mirroring the global trend, India's yields firmed up despite a dovish RBI. We believe that the current state of rising yields is similar to episodes in history where growth recovery was the key driver for rising yields. During these episodes, equities tend to deliver positive returns.

Further, we believe that RBI would likely keep rates on hold for now and the liquidity stance would likely stay accommodative. Globally, and in India, government debt-to-GDP ratios have gone up due to the fiscal support needed on account of the pandemic. Hence, the onus will be on central bankers to ensure orderly movement in the bond markets and reduce volatility.

With the markets having run up sharply, one cannot rule out volatility in the near term. However, we believe that corporate earnings and economic recovery would be the two key factors among others determining the direction of the markets. As the pace of economic recovery picks up, we believe that the market movement would continue to get more broad-based in nature as compared to the polarised market movement in the last three years with bottom up stock picking being the way forward.

Q Top five sectoral themes for investors that can give good returns by Women's Day 2022?

Some of the key themes that we are focusing on include:

Manufacturing revival: Government policy push towards investment-led growth is evidenced in the budget and the PLI scheme is clearly towards improving manufacturing and investment related spends. On the supply side too, policy focus has been towards removing bottlenecks. The labour reforms announced some time back are a step in the same direction. We are therefore positive on domestic cyclicals (cement, capital goods and industrials) and banks, especially the large private sector banks.

Real estate and allied sectors: The other key trend that is sustaining is the improvement in the housing and real estate which is also positive for sectors such as cement, building materials and consumer electricals. Some of the factors driving the improvement in the real estate sector include increasing affordability, all time low interest rates and the policy environment supportive of the sector.

Supply chain shifts away from China: PLI scheme has now being broadened in order to cover many other segments the latest announcements being for the pharma sector.

Market share shifts continue and the theme of consolidation in sectors and sub sectors remains intact. Clearly, the organised sector is benefiting due to shift in market share from the unorganised space and the companies with strong balance sheets and cash flows are faring much better.

The trend in financialisation of savings and further use of digital technologies remains a structural theme.

Q Do you expect the March quarter earnings to be better than last three quarters and will the March quarter earnings decide growth trajectory for the coming quarters?

Corporate earnings has been one of the key drivers of the market. So far, over the last two quarters, corporate earnings trajectory has surprised positively with the net profit for Nifty companies recording robust double-digit growth after a considerable period.

In Q3FY22, Nifty companies recorded net profit growth of 22 percent YoY after reporting 17 percent YoY earnings growth in the previous quarter. More importantly, the pace of earnings upgrades have been higher than downgrades leading increase in consensus earnings estimates for FY21 and FY22. The sustenance of this trend is the key for markets and therefore the March quarter will be closely watched.

The base for corporate earnings is favourable in Q4FY21 and so far normalisation and improvement of economic growth appears to be on track. For example, GST collections remained robust, while the composite PMI recorded expansion for the fifth consecutive month. Early data for February shows that the trend has held up with growth in power demand, e-way bills and rail freight remaining positive.

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.
Sunil Shankar Matkar
first published: Mar 9, 2021 01:51 pm

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