Amid stock market volatility, this sector may offer good value to investors

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Updated: October 22, 2019 12:04:48 PM

On the ongoing slowdown, Dheeraj Singh of Taurus AMC said it would take a couple of more quarters for recovery to set in.

Dheeraj Singh said that the recovery would be first visible in the consumer segments going forward.

Even as the stock markets see volatility, FMCG or consumer durables segment provides a good value to the retail investors, says a veteran fund manager. The sector looks all the more attractive in the ongoing slowdown as the recovery is expected to be visible here going forward, Dheeraj Singh, Head of Investments, Taurus AMC told Ashish Pandey of Financial Express Online in an interview. It would take a couple of more quarters for the recovery to set in, he added. Adding, he said that it’s important that an investor builds a portfolio comprising quality stocks that would provide healthy risk-adjusted returns even after accounting for short term volatilities.

Here are the excerpts of the interview:

While equity mutual inflows have slowed in September, SIP inflows continue to remain robust. What is the likely trend going forward?

SIP flows are likely to remain robust as there are several investors who have matured enough over the years to have adopted disciplined regular investing. Lumpsum flows remain linked to overall market sentiment. While broad market indices have held up well in the recent past, the same cannot be said about a large segment of stocks in the market, especially in the mid and small-cap categories. Lumpsum flows would also improve once the sentiment around these stocks improves.

Will the latest SEBI’s move to impose exit load on liquid schemes in mutual funds impact the inflows? What should retail investors do in such a scenario?

SEBI’s move to impose exit load in liquid schemes is an attempt to deter large very short term flows into these funds. It is primarily targeted at discouraging large lumpy flows from wholesale investors like banks and large corporates. Exit loads are applicable only for investments of less than 7 days. Most retail investors in liquid funds do not have such a short term horizon. Even if they have, investors can largely avoid the levy of exit load by staggering their investments and withdrawals appropriately. The principle of first in first out would be followed while levying exit load and as long as one plans out the investments in liquid funds appropriately it shouldn’t pose a problem, especially for retail investors. I would be more concerned about declining returns from liquid funds as short term interest rates fall in line with policy interest rate reductions by RBI.

Stock markets have remained largely volatile over the last many weeks. Where do you see the markets stabilizing in the coming days?

Volatility is an inherent feature of markets. It is volatility that provides money-making opportunities under all market conditions. In the short term, I expect volatility to continue. In the long run, a portfolio comprising quality stocks would provide healthy risk-adjusted returns even after accounting for short term volatilities.

Given the ongoing Q2FY20 results, which sectors in your assessment are likely to record robust earnings?

The economic slowdown has affected almost all segments of the economy. Recovery in the economy will probably take a couple of quarters more and is likely to show up initially in the consumer segments as the financial numbers for the investment-led segment of the economy would take some time to manifest itself. So, while it is difficult to talk about robust earnings immediately, if it does come it is likely to be led by the FMCG/Consumer Durables segment – essentially segments dependent on non-discretionary spends.

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