Invest in tranches, not lump sums in current environment, suggests Trideep Bhattacharya of Edelweiss AMC

Edelweiss AMC Indian is bullish on Indian equities from a medium-term perspective but expects the near-term to be volatile. In an interview with MintGenie Trideep Bhattacharya, CIO-Equities, Edelweiss AMC advised investors to invest in tranches and not lumpsum investments. He continues to be constructive on mid-cap funds for investors with an investment horizon of 5-10 years but remains cautious on small-cap funds, particularly with a near-term view. Edited Excerpts:

How should investors position their portfolios amid the current volatility?

Investors should position their portfolios in line with the asset allocation that is commensurate with their return objective. For risk-averse investors with an investment time horizon of 1-3 years, we would recommend Flexi-cap Funds, while for investors with an investment time horizon of 5-10 years and higher risk appetite, we would recommend focussed equity funds that capitalises on bottom-up stock-picking, because we strongly believe, India is a bottom-up stock-pickers’ market.

Finally, to smoothen out volatility in current equity markets, we would advise investors to invest in tranches and not lumpsum investments.

Which sectors do you expect to do well?

We are constructive on Indian equities from a 2-3 years perspective. This is driven by our positive stance on the following themes which fall across multiple sectors:

Rebound in Credit Growth

Private Sector Investment Demand

House-hold Capex Demand

Beneficiaries of Govt. growth schemes and China plus one demand

We expect stocks exposed to these themes to do well.

Pharma funds have not performed well in the past 1 year, do you see that improving?

Pharmaceuticals had super-normal earnings driven by vaccines during covid times and hence, they are going through a phase of earnings normalisation. As it gets complete, we would expect the sector and funds associated with the same to return to normalcy.

Would you advise investors to stay in smallcap funds after their poor performance or withdraw?

We continue to hold the view that the valuation differential that existed between large, mid and small-cap stocks has narrowed to a large extent. Hence, stock price movements will likely be driven by stock-specific earnings upgrades/downgrades rather than anything else. In such conditions, bottom-up stock-picking oriented around pockets of future earnings upgrade is the best investment style in our view.

We continue to be constructive on mid-cap funds for investors with an investment horizon of 5-10 years. We have been and continue to be cautious on small-cap funds, particularly with a near-term view.

With equities having corrected steeply in recent times, should investors accumulate more equity mutual funds or stay away for the time being?

We are positive on Indian equities from a medium-term perspective. However, we expect the near term to be volatile. Hence, to smoothen out volatility in current equity markets, we would advise investors to invest in tranches and not lumpsum investments.

What funds - largecap, midcap, multi cap, flexicap, smallcap, index funds would you advise investors to go for (for a time horizon of next 3-5 years) and why?

For risk-averse investors with an investment time horizon of 1-3 years, we would recommend Flexi-cap Funds, while for investors with an investment time horizon of 5-10 years and higher risk appetite, we would recommend focussed equity funds that capitalise on bottom-up stock-picking, because we strongly believe, India is a bottom-up stock-pickers’ market.

What are your views on the IT and FMCG sectors? Positive or negative and why?

We are underweight in both these sectors. While we have been negative on IT due to lack of valuation comfort, we have been negative on the FMCG sector as they are suffering the impact of high inflation in the near term.

Metals also have a lot of headwinds. Do you see the sector improving in 2022?

We have been underweight on Metals since the beginning of 2022 and continue to maintain that view as of now.