Some interim earnings growth over the past has led to an adjustment in valuations of large and midcap companies but they are still higher than their historical averages, according to Kotak Mahindra Asset Management Company Chief Investment Officer Harsha Upadhyaya.
The fund house believes that small cap valuations are quite expensive even after consolidation period. In the past year, the Nifty 100 index is up 6.1%, BSE Midcap 3%, and BSE SmallCap has fallen 1.5%.
Upadhyaya said, “We have always stuck to investment discipline, irrespective of the phase market is in, which is about looking for opportunities for a longer-term perspective and buying them at reasonable valuations.”
He added that the focus has been on quality of the business, management expertise, and valuations and noted that all stocks in the portfolio will not necessarily do uniformly well at all-times and one needs to keep evaluating the entire portfolio. “The way we look at it is if there is any change in investment thesis or valuations,” he said.
Currently the core of the portfolio is tilted towards domestic businesses as it sees headwinds for global oriented/ export facing businesses within domestic it is a diversified basket, he said.
Upadhyaya advises investors to keep longer investment horizon of at least three to five years for equities as returns are not linear, they will always be more volatile than other asset classes, he said. Calling the post-covid returns a bonus, he said investors should expect more moderate returns compared to last five years.
Going ahead, he said, a resolution with US that is favourable for India as well as earnings recovery will drive the up move in the market. According to him, currently the market is pricing improvement in the second half of the next year, the numbers have to be higher than that.