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Last Updated : Jul 25, 2018 07:36 AM IST | Source: Moneycontrol.com

Only 5-6 stocks are holding the Sensex and Nifty, and it's a concern: Jinesh Gopani, Axis AMC

caluations remain elevated because equity market is getting narrower and narrower. The money which is coming into the market is flowing into selected stocks


Investors should look at equities as long-term asset class and only invest if they have a time horizon of at least 5 years. Jinesh Gopani, Head – Equity, Axis Asset Management Company recommends investing in multi-cap funds because they offer investors ideal diversification across large, mid and smallcaps.

In an interview with Moneycontrol’s Hiral Thanawala, Gopani talked about equity market outlook, strategy to generate alpha in portfolio, reasons of consistent performance of Axis Long Term Equity fund in ELSS category and more. Edited excerpts:

With equity markets at new high, which direction do you see it heading and which factors are leading this current run?

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We think Sensex's new high is just a number. If you go deep down, there are few fundamental stories that is helping the market rally. Only 5-6 stocks with large weightages in the Nifty has mainly taken the market to its new peak. In Nifty 50 index, there are a lot of diversions in the stock performance. See mid-cap index performance in last seven months i.e. year-to-date it's down by 18-20 percent and small-cap index is down by 22-24 percent.

From February 2018, if you see entire trade momentum has been broken with an introduction of LTCG for equity investors in the Budget, oil prices started going up, earnings of March quarter were also not up to analyst expectations, global trade war issues, which have their own impact to our economy, etc. These are some of the factors that led to correction in mid-cap and small-cap stocks. The prices of stocks in this indices corrected but didn’t bounce back. Only 5 to 6 stocks are holding the Sensex and Nifty and that’s the worry area for us.

It is difficult to chart an upward trajectory for the markets due to headwinds on the macroeconomic front. We believe earnings growth momentum trade and equity market has become narrow so people could look at quality stocks which have growth potential. Going into election season, we believe quality stocks with good fundamental stories and strong growth are likely to do well.

Are valuations of large and mid-cap stocks expensive at this time?

At present, valuations remain elevated because equity market is getting narrower and narrower. The money which is coming into the market is flowing into selected stocks across indices. So, these stocks continue to remain expensive. But, earnings growth is visible in these companies. So, to that extent it’s not only valuations going up but earnings growth is also coming in. We expect once the broader rally starts, then hopefully this companies will go on time correction mode and stocks of other companies will bounce back.

What is your advise - reducing equity portion and book profits?

It depends on risk appetite of an investor. If one is investing in mutual funds with long term view then he/she shouldn’t be worried about valuations, achieving new peak by major indexes and decide to exit just for the hack of exiting. Structurally, we feel the fundamentals are in good shape so no need to exit and book profits.

What's your strategy to generate alpha in portfolio?

As a house, we are bottom-up stock pickers. In each and every sector there are good companies and not so good companies. There are companies which can disrupt the business models in that sector and few companies which will die down. So, if you are in this side of a trade by identifying good promoters, companies which has some USP compare to peers in the industry, then you can get multibaggers in your portfolio. We always look into each and every sector to search for leaders and probable leaders in the next 10 years. Then we take big bets on those companies and hold for long term in our portfolio. That’s how we keep on evaluating of stocks. This is our research process which we follow and don’t participate in momentum trades. We keep 30-35 stocks in our portfolio and invest in them heavily.

What makes Axis Long Term Equity fund such a consistent performer in ELSS category?

It’s been very good journey in terms of AUM growth and performance also has been consistent by delivering returns year after year for its investors. There have been couple of bad cycles for this fund as well but overcame the mistakes and have been consistent performers over last 3 to 5 years in ELSS category.

Globally, business cycles are getting shorter which we are seeing over here as well. Now, business cycles are of 7-8 years. So, our stock picking philosophy helps us to identify newer and newer ideas in particular sector. We have accumulated those stocks in our portfolio year-after-year which has created alpha in this scheme. We have conservative approach in stock selection and are identifying leaders / probable leaders in the portfolio which is helping Axis Long Term Equity to perform consistently.


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First Published on Jul 25, 2018 07:36 am
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