Valuations of the domestic equity market have become a big draw with the recent correction and there is an opportunity for investors to make the most of it, said Vetri Subramaniam, Group President & Head of Equity at UTI Asset Management Company Ltd.
In an interaction with Moneycontrol, Subramaniam said: "Valuations are not as low as they were during the global financial crisis in 2008-09 or even in 2003-04."
He is of the view that a slowdown in the short term is inevitable and could impact the FY21 earnings but added that a rebound post-crisis could be sharper than expected, based on the past experiences.
"The lesson from history is that rebound in economic activity could be sharp after a crisis. We are patient investors," Subramaniam said.
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Foreign institutional investors (FIIs) have alone pulled out more than Rs 60,000 cr from the cash segment of the Indian equity market in March alone.
Impact on Economy
Subramaniam said that economic activity has dropped sharply due to the lockdown.
However, he feels, this can be partially mitigated from the benefit of lower oil prices.
"Corporate sales growth and profits will likely be adversely affected in FY21. But if we can navigate this period well, then a recovery should set in thereafter," Subramaniam said.
Strategy
He pointed out that investor behavior and overall flows have been quite encouraging.
He recommends investors to stick to their asset allocation plans and rebalance in line with that.
He pointed out that it is important ‘not be reactive to fast changing situation.’
“We have at the margin shifted allocations towards companies that are likely to emerge stronger from this challenging economic environment and uncertainty and are supported by attractive valuations. Over time if new structural trends emerge, we will obviously have to consider their impact,” Subramaniam said.
Sectors
At a time when market have been in the downward journey, Subramaniam sees value buys across sectors.
"We would expect some business to benefit from trends like increased work from home if that were to become a structural trend," he said.
He believes sectors such as hospitality and travel may experience stress for a longer time.
When asked on which sectors the fund house is betting on, Subramaniam said: "Our focus is on picking companies rather than sectors that we believe is the more crucial source of Alpha as the economy navigates this challenging period."
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.
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