This Diwali, you know that investors’ portfolios are sitting at much higher gains as compared to last Diwali. Would it be wise to cut some of the gains because you also believe that the average valuation is higher than the 10-year average and that the bulk of the positives are in the price? Or is the scenario not so dire to take some money now?
We take a neutral outlook on the market which means asset allocation needs to be rebalanced based on how profits have been made in equities. For example, those who invested x percent in the previous year would have seen a marked increase towards equity in the overall offerings, as equities have outperformed other asset classes in the past year.

From a medium to long term perspective, we still believe that the corporate earnings cycle is changing and we are in the early stages, in the next two-three years, going forward with very strong earnings growth. The question is how much of this discount has already been availed from the current valuation point of view. I would say that at least the immediate term is well discounted.

So to that extent one should not extrapolate the kind of returns that were received last year to repeat next year. If the horizon is of a longer duration of three to five years, and if one is okay to bear some volatility in the interim, then these are also the basic levels to continue investing in equities. But we are asking investors not to invest lumpsum at this time and adopt a different and disciplined approach for a fixed period.

How important will the Fed meeting this week be in terms of indications? How will tapering start? What would be the takeoff amount from the market in terms of liquidity and is there a possibility that some part of that taper is already in price?
Yes, the kind of commentary coming from the Fed in the last few meetings is pretty clear. We are going to see the taping very soon. Also, it is likely to increase by the middle of the next calendar year. More or less the markets know that it is likely to start by the end of this year and it will continue for some time. US 10-year yields have now risen. How much and how little it is due to inflation concerns, we don’t really know. But at least the fixed income market is already pricing in easy withdrawal liquidity conditions from here. While the equity markets have dispelled all the panic and there has been some minor correction, so far, there has not been any major concern over a possible slowdown.

But these assessments need to be cautious. As the taper begins, another round of panic may ensu. For the past one month, FIIs have been selling to take profits in India. Second, India still remains at a premium to all emerging and global markets in terms of valuations.

In CY2021, emerging markets have remained largely flat, but as there is panic in the global market, there could be some further selling from FIIs and Indian investors as well.

What are your thoughts on the real estate space? Deepak Parekh recently said that the best time for real estate in several decades is starting.
We have taken a slightly different approach. While we are bullish on the real estate space, we prefer the home improvement and home construction sectors rather than just playing through real estate companies. Yes, we have real estate companies in our portfolio but to drive the whole boom in real estate, we are also betting on cement, various materials required in home improvement and home construction like tiles, ceramics, paints, pipes Electrical and soon.

So based on the investment order of the fund and the liquidity available in various sub-segments of the Home Improvement, we have built our position, but obviously after a gap of maybe 10-12 years, we are seeing an uptick. real estate. Inventory levels have gone down, sales momentum has picked up and one can say that it is due to consolidation for regulation of RERA in the real estate industry or some of the symptoms given by various state governments in the context of reduction in stamp duty. is through. Registration. There has been a better momentum and we also believe that the consolidation that has happened over the years is going to help some of the established and big players.

What do you think is the most overlooked place right now where the risk reward is very attractive?
We still believe that there is more room in the cyclical regions in terms of potential recombination. We are just seeing the economic momentum coming back. If this continues, we certainly see earnings growth potential in some cyclical sectors, including financials. Hence, financials, industries, multiple manufacturing sectors, cement and construction are pockets where earnings may grow as compared to current estimates and if it does, there is a possibility of a revaluation across the space.

However, when one looks at IT, FMCG or even consumer durables, one can see that most of the upside has already been captured in the current valuations and they are historically at higher valuations. Also, compared to the market, the valuation levels are quite high and hence the scope for revaluation is limited in some of the sectors that have performed so well in the last 12 months.

We believe that if you believe the economic momentum will remain and gains from here, most cyclical sectors should focus on those areas from here on out.

Chetan Ahya of Morgan Stanley says that we are in a scenario from 2003 to 2007. do you agree?
This statement is partially true but there are some inequalities as well. One such inequality is clearly in its infancy. The entry level valuation was relatively more attractive than today’s valuation. The other difference is that at that time the investment cycle started on a large scale, but today when we look at the economy, we see that there is a need for massive investment, but we have not really seen a huge investment. The circle is visible. I would say it is a little different from the 2003-2007 era.

But on the other hand, there is high retail participation and high institutional investment. There are some additional positives and dissimilarities when you compare it to the old cycle.