Daily Voice | This investment strategist believes 5% decline in markets is as likely as a 5% rally

Vikas V Gupta is the CEO & Chief Investment Strategist at OmniScience Capital

When markets around the world is reeling under the fear of the Middle East crisis spilling beyond the Gaza Strip and affecting the global economy more severely, some experts believe that investors should instead focus on the fundamentals while making their decisions.

"Geopolitical tensions are concerning, as a peaceful world is more conducive to economic and social development," says Vikas V Gupta, CEO and chief investment strategist at OmniScience Capital. "Instead of predicting market movements, investors should focus on analysing fundamentally strong companies with promising growth prospects, available at discounts to their conservative intrinsic values."

Seasoned for around 20 years in the capital markets, the strategist looked optimistic as he shared his views in an interview to Moneycontrol. For the medium to long term as well as in the short term, he remains bullish on the equity markets, given the strong economic fundamentals across the globe, including the US, India, and the EU. Excerpts from the interaction:

Predicting the market movements, much like weather forecasting, falls under the realm of Complex Dynamical Systems. These systems are intricate and influenced by multiple interplaying factors, making precise predictions a challenging task. While a further 5 percent decline in the market is possible, a 5 percent upward movement is equally likely.

Our advice to investors is to focus on analysing fundamentally strong companies with promising growth prospects, available at discounts to their conservative intrinsic values. For long-term investors, every market dip presents an opportunity, provided they have surplus cash to invest. Even those with limited additional funds can assess their portfolio, selling companies closer to fair value and acquiring those at significant discounts, thereby realigning their holdings.

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We don't place excessive importance on US bond yields. Fluctuations in these yields can be attributed to short-term investor behaviour, shifting from long-duration to shorter-duration bonds due to unmet expectations of rate cuts.

Geopolitical tensions are concerning, as a peaceful world is more conducive to economic and social development. However, it's worth noting that while regions like Ukraine-Russia and Israel-Gaza are experiencing tension, the likelihood of these conflicts spreading widely is low. Most neighbouring countries aim to contain and resolve these issues swiftly.

From a medium-term to long-term perspective, we remain optimistic about equity markets, even in the short term, given the strong economic fundamentals across the globe, including the US, India, and the EU.

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Even before the decline, largecap stocks were relatively undervalued compared to midcaps and smallcaps. When larger companies are trading at a significant discount, they deserve preference.

However, we remain agnostic and explore opportunities across the entire market. With the recent market fall, there are now opportunities in smallcap stocks as well.

We don't place significant emphasis on factors like the India VIX. Our approach is fundamentally oriented and bottom-up. We focus on studying companies with strong fundamentals, persistent competitive advantages, exposure to growth vectors, and attractive valuations compared to their intrinsic values. The VIX may not always provide a comprehensive representation of the entire market situation.

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National elections tend to hold more significance, as they determine the management of the country and its economic policies, which can have a long-term impact on companies and investments.

In contrast, state elections are more indicative of local factors and may not necessarily reflect the outcome of national elections. Voters often vote differently in state and national elections, making state results less indicative of broader national trends.

From a long-term perspective, most companies appear optimistic and are making substantial investments in capital expenditure, indicating the market's long-term potential. Many companies have significant capital work in progress, which is likely to translate into increased revenues and earnings within the next two-three years.

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The mid-term outlook, spanning three-five years, also looks promising. At the moment, it's advisable to maintain the current stance and await further data before making any significant changes. Considering the global geopolitical tensions, it's prudent to exercise caution in a time of global uncertainty.