Mohanty further says that there is a cyclical recovery in autos. So, when one looks at broad pockets, apart from IT where he is a little cautious, there is value across markets and what is good for the investor is also good for fund managers.
The SIP data is due and there is a fear in the market that because of this volatility, there may be some amount of pullback of flows from the retail guys and probably that is why there were reports that many funds in the market have elevated cash levels now. If not to sell, at least to be able to kind of honour the redemption if they arise. Have you also done the same? What are your expectations, another record high or could it see a dip?
As a policy, we are a fully invested fund. We believe that the asset allocation happens at the investor or the distributor or the advisor’s end. Once the money is given to us to invest in an asset class, we buy the asset class. So, for us, 2% to 3% cash is a lot of cash.
No, we have not seen net sales negative for quite some time. This is because what you are sort of referring to is the large SIP book which the industry carries. We do carry a fair amount of SIPs within ourselves in excess of Rs 850 crore per month and that really helps the flows when you put it in perspective.
When you look at the granular level of the SIPs in the market, it is very difficult to stop all of this together. So, there could be a slowdown due to the markets being wherever they are for the last one-and-a-half years but I do not see any dramatic change in the behaviour of SIPs at least in India. It has become the go-to investing solution to investors and I see that consistently on the uptake rather than any reversal of that. The cash calls are a function of a fund manager call. At our end, we do not take cash calls.
What are your thoughts on hypotheses which you may be discussing with your team and hence also conveying to your investor fraternity on the trajectory of rates or even the trajectory of inflation? In the next six months, do you see that peaking out?
Everything changed with the recent change in the interest rate behaviour of the US. Three months ago, we had broadly concluded that interest rates had peaked out and now when we are looking at a slim possibility of US interest rates going to 6%, we are back to the drawing board and everything changes from here.
We continue with the basic thought that in an interest rate rising sort of regime it is very difficult for equities to get re-rated and that is how it will play out for the next six-eight months and there is no quick fix at this moment. Global data is extremely fragile and we have to keep a watch on that and any small blip on that and especially on US data will impact the global market, there is no doubt or debate on that. What is unfolding here for us is a different story. Of course, Indian markets are very different because the Indian data points are very different. Our data points are completely isolated from the world and that is why we remain very different at this moment from a market perspective. When we look at what we tell investors or what we look at from our investing perspective, these are great accumulation times and these are great times when you will get good businesses at good values. The market gives opportunities, so wait for those opportunities, be a little patient. There are enough opportunities in the market at this moment. But yes, long-term conviction has to be in place, However, that conviction might get tested in the next six-eight months.In 2023, if one really takes a bet on either increasing SIPs or continuing with it, in the worst case scenario going into 2024, even if it troughs out and the market goes further down from here, at least the deployment happens at attractive pricing and the three-year picture could be very meaningfully rewarding?
That is the beauty of where we are today. The volatility of the market is the best friend of an SIP investor. At this moment, the only hero in the market is the person who is continuing the SIP and who will remain invested in this market. This person will finally end up being the winner. The India long-term story has only got better post Covid and when one gets that data point picture very clear in your mind, the only person who will benefit from that data point will be a person who is invested in the market.
So, remain invested, add more to your SIPs because suddenly if you want all data points to be correct, the markets will not be right for investing. The value of the market will change completely. So, it is when data points are weak that one gets value and these are such times.
I have been a big fan of your midcap, smallcap strategy for some time and a lot of investors on the Street will swear by it. What are your thoughts on the valuations? What is your investment team’s view on the valuation in the broader market? They have gotten beaten black and blue in the last one-and-a-half year, much before Nifty or Bank Nifty became weak.
When one looks at valuations, one looks at opportunities and when one looks at opportunities in the market, we see enough opportunities in manufacturing broadly. Financials continue to be valued. We have seen the change in the financials in the last few days. There is value there which can be picked at times and it is caught on a long-term trajectory. When 37% of Nifty50 is composed of financials, that speaks of the way the market cap movement is moving in the broad market.
Broadly we feel there could be some fatigue on the consumption side because post Covid, there has been a continuous rush towards consumption for whatever reasons but that is something which we are watching out for. We feel there is a cyclical recovery in autos. So, when one looks at broad pockets, apart from IT where we are a little cautious, we find value across markets and what is good for the investor is also good for us as fund managers.
If you can accumulate some of these at good values which we time and again seem to get, the end result can be very different. As for the midcaps and smallcaps, I cannot comment much on the smallcaps because we do not have a fund there. But on the midcap side, it is a time to pull up your socks and continue those SIPs and leave it to the fund manager to find that value for you. Yes, there are some good businesses getting to be available at some good prices. So from a valuation perspective we are beginning to feel that it is getting fairly valued.
From a global perspective, Indian markets might look a little uncertain for the short run but for the longer run, what you say is correct. The accumulation phase is definitely in front of you.
