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Last Updated : Aug 14, 2018 09:08 AM IST | Source: Moneycontrol.com

TIW Private Equity is betting on these 3 long term value creators, should you?

Mohit Ralhan of TIW Private Equity said increase in interest rates and specific event risks around de-globalisation are key risks

Sunil Shankar Matkar

The Sensex on Monday logged its second straight session loss, tumbling over 224 points to a near two-week low of 37,645 on massive sell-offs in financial stocks as the battered rupee and Turkish financial crisis spooked investors. The broader Nifty too fell by 73.75 points to end at 11,355.75. The rupee plummeted to its record low of 69.85 (intra-day) against the dollar, tracking global cues.

Mohit Ralhan, Managing Partner & Chief Investment Officer at TIW Private Equity feels investors should not be perturbed by the market correction. He sees rural and semi urban consumption, infrastructure and budget housing plays as long term value creators. “India is migrating through a bull market led by a sustained period of moderate inflation and economic growth,” he stated.

Edited excerpts

Q: Mutual fund flows seem stable but flows into equity schemes (down 49 percent from the record high) as well as balanced funds (nearly 97 percent from all-time high) slowed down drastically on a monthly basis in July. Do you think the flows have peaked?

A: Reduction in equity fund flows was triggered by a rise in global inflation risk and the subsequent impact of rising interest rates. There is also an increase in uncertainty due to fear of an elongated trade war between the US and China.

Increased probability of event risks has led to reallocation of capital into non-market linked/fixed rate return investment avenues. The flow should start improving if Indian corporates start demonstrating strong growth.

Q: With interest rates on a rise, do you think debt funds will be a better option for investors?

A: India's tough credit conditions have made companies look inwards for value enhancement through margin improvement. Such environments end up creating industry leaders with significant cost advantage. Identification of such assets could yield better long term value than fixed return funds.

Q: FII flows improved in July (net buyers to the tune of Rs 491 crore) compared to outflow in the previous three consecutive months. Do you expect that to improve further?

A: India’s attractiveness as an investment destination remains relatively higher.

Q: The benchmark indices have corrected after hitting record highs. Is there more steam left in the market or could it be rangebound from now onwards?

A: As an investor in privately held companies we are not very much concerned about index levels. For individual investors also, it’s always better to look for excellent companies at reasonable valuations, irrespective of index levels.

Q: What are the major reasons that are driving the market higher? Also, what are key risks and concerns for the market domestically and globally?

A: The market rise is not very broad-based and driven by a handful of companies. The key risks are increase in interest rates and specific event risks around de-globalisation.

Q: Midcap and smallcap also recovered from their 2018 lows but are still down 9-12 percent in 2018? Do you expect it to turn positive or remain volatile in the next one year?

A: One can find attractive investment opportunities in the midcap and smallcap space. Well run companies, especially consumption driven ones, can offer better returns.

Q: What are the sectors that you would advise people to buy and exit at current levels?A: Rural and semi urban consumption, infrastructure and budget housing could be long term value creators as the country is migrating through a bull market led by a sustained period of moderate inflation and economic growth.
First Published on Aug 14, 2018 09:08 am