At 12K, how has your strategies for investment changed
Investment strategies have changed to become more cautious. Along with a focus on rise in price of a stock, there is equal or more focus on what can be a downside in a stock. Rotation across sectors and stocks depending upon valuation and price movement has become more frequent.
Which sectors do you feel are overvalued Why
It is probably difficult to take broader sectoral calls in the current market. However, sectors like oil, petrochem, banking and media broadly have been underperformers. The investor interest has shifted to real estate stocks. FMCG and infrastructure continue to see good interest.
Why are long-term returns lower than short-term returns. The returns on the Sensex are at 84% for the last one year, 10% for the last decade. Long-term investors should be rewarded more. Comment.
If we are looking at short-term returns, we also need to look at years 2000, 2001 and 2002 when there were negative, nil or stagnant returns. Long-term returns are consistent and reward the investors duly.
Though for long-term investors, timing the market is a grave mistake because the periods of superlative returns are sporadic. If you are out for 10% of the days which would have the highest returns, the long-term returns would be significantly low.
What will be your advice for long-term investors
Markets are normal if they are valued between 50% and 200% of their fair value. Volatility is always inherent in equity markets and will continue to remain giving it a stature of a risky asset class for short period of times. However, over long periods, the volatility reduces and the benefits of equity investment are available if investors stay invested in the market.
Do you think the present rally in the market is sustainable No one has seen such kind of short-term returns in the Indian markets. What is your perspective
This is a standard phenomenon in any bull market internationally. When any economy is moving from a slow growth phase to high growth phase, such sharp rise has been witnessed in the past in other markets. India is following that.
Will global inflation and interest rates affect Indian corporate performance
Thomas L Friedman has become a household name with his book The World is Flat and the world is indeed flat. Global events affect all countries but the magnitude may be different. India is no different and interest rates and inflation are sensitive issues which guide the flow of capital across the globe. Indian corporates are increasingly accessing the global markets for their capital requirements as can be seen with the no. of overseas issues. It will surely impact the bottom-line, but they have to learn to manage these risks and our corporates are doing a good job at it.
Is there a lack of good paper in the Indian markets Do you think that there is only a basket of companies that deserve these kinds of valuations
There is no dearth of good paper available in the market and it is not right to say that only a basket of companies deserve rich valuations. There are about a 140 companies in India currently with market cap of over $1 billion. There are 400 companies with market cap of over $200 million. This was not there two years back and the situation is improving.
We see many Indian companies acquiring companies overseas in the niche segment. Corporate India is on an acquiring spree. Especially in pharma and software sector. How do you look at this model
Pharma and software have indeed made a beginning by acquiring companies abroad and this phenomenon will soon catch up with other industries also. We are seeing Indian corporates thirsty for growth and eyeing overseas market to quench their thirst of increased market access and production facilities. We would see a lot more activity happening in the sector in the days ahead. Automobile is another sector which has seen this happening.
Emerging markets are commanding very high P/Es. Do you think that India is the right destination at these levels for foreign investors
One pays a higher price for growth and even higher if the growth is sustainable over a long period of time. Indian juggernaut is rolling and does not look likely to stop in near term. We are targeting higher GDP growth in the coming years.
There have been studies done which project India to be the top three countries in terms of GDP by year 2050. Our working population would be the largest and we are skilled.
We see ourselves as the hub for not only the services needed by the world, but for certain manufacturing processes also. All these make India one of the attractive destinations.
There is a lot of growth seen in European emerging markets and Latin America. Where does India fit here in terms of returns
India has been ahead of other markets in terms of returns in the last one year of the run, but if you compare it over a period of two years there is not much of a difference in the returns the indices have given. This would include countries in Europe and Latin America.
However, the difference lies in the human resources. European countries are having a severe shortage of human resource and the situation is bound to increase with little population growth. This is not so with India and our liability at one point has partly become an asset in this knowledge-based world today.