Is there a reason to get slightly worried about the market setup, the macros and the valuations, do you think the market run up has been too fast, too quick and too swift?
See luckily, we have a lot of stock, which means that the incremental investors are much smaller than the amount of stock of money that we have. What happened in the last six months was that the macro of India improved very significantly. Last year, same time, we used to worry about crude oil, we used to worry about current account deficit, we used to worry about inflation.
We do not worry about any of these things, we worry only about valuations, valuations and valuations. So, I think there is room to worry. And the fact is that incremental investors have to worry but what about people who have been invested with us over the years, they have less to worry because they made good money.
And there is nothing at this point of time which says that they have to take away the money and redeem the money that is not what the market is suggesting.
But people who have to invest incrementally, they have to be a bit more worried rather than the people who have invested over the years.
So that brings me to my next question. What is looking like the overvalued pocket or pockets in the market right now? And because temperamentally, you have been a contra investor what is looking undervalued if there is anything?
Actually, if you look at it at this point of time, there are very few pockets where there is undervaluation or there is fear. And that is the challenge at this point of time for us as investors because the few areas where you can see that returns are negative or fairly muted is technology where the numbers are coming bad. So that is an area where I believe gradual investment over a period of time should work well. Because you can see that there is very low growth being seen in the sector over the last few quarters and maybe over the next few quarters as well.So that is one area where you can see that there is a challenge of growth and therefore the valuations are continuously dipping.
The other areas where you are seeing clearly bad numbers at this point of time are sectors like chemicals. But there, if you see the valuations have been so high and very-very high over the years that what has happened is only some level of correction in the recent past.
So have we reached the bottom is something, we were actually zero in some of these sector in a sector like chemical in many of the sector stocks.
So we are still evaluating, have we reached a situation where the sector requires investment is something we are thinking about.
These are some of the few sectors at least where you have seen a fair amount of negative news flow. But otherwise, the rest of the sectors are all seeing very positive news flow.
And so there is no scope for contrarian buying. The challenge of contrarian selling is India as it the best country in the world to invest at this point of time.
And while we may think that India is the only country which has done well, you go and look at what has happened to Taiwan, look at what has happened to Japan, what has happened to Korea, what has happened to NASDAQ.
You can even look at what has happened to Europe, you will find that all the countries in the world have delivered huge equity returns in the recent past.
So it is not as if India is the only market which has done well, many of these markets have done well in the recent past. And so it is tough to actually make a call that India is only performing market at this point of time.
So it is a bit challenging from an investor perspective, what to do if you want to take out money, because there are no contrarian opportunities.
And if you take out money that is why I think the biggest challenge is for the new investor because I think the old investor has to just stay invested.
What should one do in this market if somebody is looking at investing the way you invest because barring IT nothing is cheap, nothing is attractive and with IT also we do not know what AI actually will frankly do?
That part of it is true that is why I said it is much easier for you to be invested in hybrid funds, rather than take big bets at this point of time.
For all the older investors it is a very-very easy time to just stay invested because you are sitting and making huge sums of money on your older investments but it is a very tough time on what to do with new money and it is not an easy job right now because other than Chinese equity markets there is no other contrarian equity market anywhere in the world at this point of time and China has huge structural challenges because of the huge debt level there.
A lot of mutual funds have stopped accepting lump sum and small cap stocks would you be considering something on those lines, do you see that we have reached that level in small cap stocks?
I think it is something that our small cap fund is Rs 6000 crores and the other clearly small caps are not cheap at this point of time and neither is mid-cap at this point of time and the flows that we have been getting in our small cap funds are really small so that is the reason why we have not yet done it.
But clearly I do not think small caps are at this point of time something very cheap or it is possibly one of the costliest places in the market and the quantum in terms of our framework I would say is considering the huge flows which have been coming into small caps it is a sign that there is a little bit of more euphoria in small cap and mid-cap than it is there in large caps.
