Even as global stock markets are currently volatile, retail investors shouldn’t worry much and remain focussed on good quality stocks in 2019, says market strategist Saurabh Mukherjea. The retail investors must hold on to their equity investments for at least 10 years to expect better returns, Saurabh Mukherjea, Founder, Marcellus Investment Managers tells Ashish Pandey of FE Online.
The investors should not be too much concerned about what China, the US and the RBI are up to in the coming year, he adds. Sharing his views on rupee, Saurabh Mukherjee tells FE Online that the domestic currency needs to be around 75 to the US dollar to find some sort of stability.
Here are the edited excerpts from the interview:
Where do you see Sensex, Nifty a year from now? How would headwinds such as general elections, crude oil, fiscal deficit, among others impact the stock markets?
I reckon fair value for the Nifty is around 9,500. However, I have no idea when the Nifty will hit that level or whether it will hit that level or not.
Where do you see rupee stabilising in the near-term?
It is relatively clear that even at Rs 70 to the USD, Indian exporters are not competitive. Even with the INR at 70 our Current Account Deficit is north of 2% of GDP. That suggests to me that India needs the INR to be at around 75 to the USD to find some sort of equilibrium.
What’s your advice for the retail investors? Could you name a few stocks that may gain or lose in the near term?
My advice to all investors – retail or otherwise, our clients our other people’s clients – is the same and it is contained in my books “The Unusual Billionaires” and “Coffee Can Investing”. Both the books suggest that we need to look back at long periods of time – at least a decade – and identify firms whose revenues have consistently grown at double digits alongside return on capital being higher than cost of capital. Once you have identified these firms, you should invest in them and then sit tight for at least a decade.
What’s your 2019 stock market outlook?
Given the ongoing fireworks between China and America and given the high voltage political action at home in India, 2019 promises to be an interesting year. That being said, I see no reason to believe that the style of investing outlined in the preceding answer will be any less effective in 2019 than it has been in the preceding decade.
When I go to the fish market, I don’t worry too much about the outlook for fish prices or for other buyers of fishes. My focus is to buy the tastiest fish possible for a nice Sunday lunch. Therefore, when I go to the stock market I don’t see why I should worry about the outlook for the stock market; my job is to invest in high quality stocks regardless of what China is doing or America is doing or the RBI is doing.
How do you see the corporate earnings next year?
FY19 promises to be the fifth year in a row of single digit EPS growth for the Nifty. FY20 might be the first year of double digit EPS growth. That being said, the fish market analogy I outlined above holds i.e. it is not something that preoccupies me.
What are your expectations from the upcoming general budget?
The upcoming budget will be for constitutional reasons a vote on account. The next real budget will be in July 2019. The identity of who wins the election will determine what is in that budget.