The Market Podcast | This fund manger who manages Rs 70k cr AUM has valuable advise for Robinhood investors

One message that I would like to kind of convey is that ultimately money is made by investment not by trading. There’s a minuscule minority of people who actually make money trading on a consistent basis, Mihir Vora, Director and CIO of Max Life Insurance who manages about Rs 70,000 cr of AUM, said in ‘The Market Podcast’ with Moneycontrol.

Q) Market rallied more than 40% from the lows since March. The recovery has been fast and furious. What is your take on market now – do you think the market has run up ahead of fundamentals, and a cool off could be around the corner?

A) The market does look a bit expensive. This could be due to the fact that we don't have earnings coming in for FY'21 and we are building hopes of a good recovery in FY'22, but that's really a bit far away in the time horizon.

As of now, the markets are frankly looking beyond FY'21 results and basically discounting the FY'22 results.

But, having said that, a couple of things, FY'22 is still a bit far away and even if you look at the current consensus estimates of FY'22, the market is not cheap even by those optimistic assumptions of FY'22.

I think there’s a bit of a froth here.

Q) Lastly, which are the mistakes especially for the so-called Robinhood investors or new age investors that one should avoid in the equity markets?

A) One message that I would like to kind of convey is that ultimately money is made by investment, not by trading. There’s a minuscule minority of people who actually make money trading on a consistent basis.

Consistent is the keyword, you make money in a day, or a few days and then you lose. That’s not consistency. So there are very, very few highly skilled or maybe lucky people who make money but ultimately the real money is made by long-term investing.

So that is one thing that people should be aware of and even if you want to trade, it should not with a large part of your capital probably and then you get a small part of the capital and build a long-term investment portfolio.

Q) The recent rally in markets could be on the back of vaccine for COVID-19, but do you think we could see a sell-off on the news? The market could play out the classic scenario – buy on rumors and sell on news?

A) The vaccine has several stages. One is, we need to kind of go through the larger tests once the efficacy is established at the lower number of testing levels.

I think that's going to take at least two-to-three months. And second is, even after you have the vaccine there's a question of scaling it up, and how fast can you produce enough quantities of the vaccine to ensure that a large percentage of the population gets treated.

I think this exercise will not be able to successfully get completed within six to nine months -- it's going to be a longer affair. Having said that, given that there are two or three very viable options -- we have seen the announcements of the Oxford vaccine and so there is optimism on that front.

I am quite bullish that the vaccine will be found very soon and the efficacy will be proven very soon. But, the roll out of that will take time.

While waiting for a cure we have already done four months of the lockdown and we are still not getting out of complete lockdown here in a lot of cities. So, the recovery is not as sharp as it should be.

Q) FIIs have been net buyers for the past 4 sessions. That has also added positivity to markets while DIIs were net sellers so far in July in the cash segment. Do you think FIIs are now ready to buy the India story?

A) FII money that we have seen has come in after a bit of a lull and it's positive but I think it's more a function of the global trends rather than India-specific trend.

The bit of money that we are getting from FIIs is after a strong rally seen in the U.S. markets. The NASDAQ especially has run up a lot and is trading at an all-time high.

I think a relative valuation play is happening between the U.S. markets and the rest of the world especially in money markets like India.

The rally in India will actually depend on the U.S. markets to continue to do well, because if there’s a global correction then I don't think we'll see the continuation of those flows.

But, if I can spend a minute on flows, one of the very stark developments over the last three, four months is the Indian retail investor and I’ve written about it so you may have seen it. The retail investor trading volumes in the Indian equity market has shot up exponentially in the last three, four months.

The fact is that retail brokerage houses, the discount brokerage houses are seeing a record number of account openings every month, almost three times what they used to say in the Jan, December to January months.

So that's a phenomenon which is kind of driving the markets much higher than what one would have expected it to go.

Q) COVID is far from over and it would take some time before the economic activity starts displaying green shoots. But, which are the themes according to you that could still outperform amid COVID?

A) So there are three things that we believe should outperform the rest of the Indian economy. Firstly, the rural economy theme because of the good monsoon last year the reservoir levels are at an all-time high.

This monsoon also seems to be going on pretty well and we’ve had government rollout the MGNREGA and increase the allocations ever since the COVID crisis happened. A lot of that money has already reached the target audience in the rural segments.

A combination of all the three leads us to believe that the rural economy is doing much better than the urban economy and even the joblessness at the rural level is improving, unemployment is improving at a better pace than the rural economy.

If the rural economy does well it means that segments like low-ticket consumption items like FMCG, paints, two-wheeler, tractors, and even small cars to benefit.

Second, we know that Indian recovery seems to be a bit slower than the global economy and that's because of the massive monetary and stimulus – a fiscal stimulus measure that U.S., Europe, Japan have taken which has led to their economic recovery being almost like a V, a V shape compared to us which is probably going to be a bit drawn out.

By that logic, what we're doing is we're playing the segments catering to the U.S. economy and the European economy which is basically through IT and of course pharma recovery theme because of the export nature and the COVID led developments for pharma so IT, pharma, some of the auto-ancillaries which are global exporters that theme basically should do well.

And the third theme that we're playing is the ‘Make in India’ theme and the fact that we are now consciously moving away from Chinese imports and so is the rest of the world.

The government has declared packages for the electronics industry, for the pharmaceutical industry and I think there are many other industries where the government will actively go out and woo global and local investments.

So I think these are some of the three themes that we're playing, the three key themes that we are playing at this point in time.

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