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The best timeto invest in quality companieswhetherit's the large, mid or small-cap is when marketsentiment is negative said Sushant Bhansali, CEO, Ambit Asset Management in an interview with MintGenie. He added that quality will last for a long time. Among sectors, Bhansali stated that the BFSI sector is currently in a sweet spot as the risk-reward is favourable. Edited excerpts:

Do you see RBI hiking rates again in the June policy? At what repo rate do you see RBI stopping the rate hike?

In the current scenario, <a target="_blank" href="https://mintgenie.livemint.com/news/topic/rbi">we expect RBI might hike</a> the rates by another 60 bps in 2022. If inflation continues to soar beyond June/ July then the rate hikes can be a bit more. RBI will probably take a pause once inflation is within its comfort zone.

When do you see the market trend recovering?What macro factors could help with that?

Markets are slaves of earnings (in long term) and liquidity (in short term). Corporate earnings are under pressure for the last two quarters primarily due to the inflationary environment. Once the global geopolitical tensions settle and the pandemic is under control inflation should cool down and the global supply chain should improve. This will get the macro resilience &amp;; get investor confidence back in the markets. We are witnessing the higher realization of the crops due to export opportunities &amp;; lower yield, which will be beneficial for farmers, leading to improving rural prospects. A good monsoon will thus be another indicator to look for in the coming months.

The new-age tech stocks - Zomato, Paytm, Nykaa have fallen tremendously from their IPO prices, do you believe this is a good entry point in those stocks?

Cash flows and profitability are the fundamentals underlying equity investments. Surplus liquidity in the last 2 years led to high valuations due to lower cost of capital, so IPO prices are not necessarily the right benchmark to compare.As the markets have entered into a reset period with a tightening of liquidity, the preference is clearly changing towards near-term earnings from long period forecasts. These are the periods where businesses have to clear the framework in terms of Good(measured in terms of capital efficiency) &amp;; Clean (strong accounting, governance &amp;; promoter acumen) to deliver value. While evaluating investing in new-age tech stocks one has to take a leap of faith as the cash flows are more back-ended than front-ended. Companies that show continuous progress towards sustainable cash flows will be rewarded the most and earliest by the investors.

LIC IPO has been falling in the grey market?Are you expecting it to list at a discount?

<a target="_blank" href="https://mintgenie.livemint.com/news/topic/lic">LIC IPO is priced</a> at relatively lower valuations as compared to previous indications. However, the current market sentiment is jittery with higher inflation, global growth slowdown, higher yields and heightened FPI selling as well. Given the large size of the offering, the listing should be in line with the overall market mood on the day of listing.

Metal stocks have started correcting again, is that an indicator that steel prices are going to fall?What could be the other reasons behind the fall?

Higher inflation is leading to a rise in interest rates which has put the <a target="_blank" href="https://www.livemint.com/market/stock-market-news/why-are-metal-stocks-falling-11652417411241.html">Metal Index falling 20%</a> from the recent highs. The Chinese lockdown has led to lower demand which can be witnessed in the YTD imports &amp; exports data as China is both a major producer and consumer of metals. The slowdown in metals is more driven currently by the global slowdown in demand rather than supply. Thermal coal prices are another variable to monitor beyond the demand-supply conundrum for metal prices.

Which sectors are the best ones to invest in, in this current market environment?What is your outlook on the BFSI sector?

The BFSI sector is currently in a sweet spot as the risk-reward is favourable. The credit growth has recently moved to9-10% from the lows of 5.5-6% during the COVID period. Margin expansion and operating leverage should result in better profitability and risks in terms of asset quality have been declining. Further, the valuations of BFSI stocks are below the long-period average.Within the Consumer Discretionary sector, the companies having better pricing power will enable our thesis on K-shaped recovery in the rising inflationary environment making the case for continuous market share gains thereby delivering disproportionate profitability compared to peers.

Investing in midcaps and small caps for new investors-Yes orNo?AndWhy?

The best time to invest in quality companies whether it's the large, mid or small-cap is when market sentiment is negative. Quality will last for a long time. Long-term consistency beats short-term volatility. We are witnessing valuations for many companies with strong moats reaching reasonable levels.The earlier you get into a quality company the more time you get to benefit from the power of compounding.

Mid and Small companies which offer a higher earnings growth trajectory compared to large companies can thereby significantly create more wealth over long periods of time. However one needs to be cognizant of their risk appetite as the ride is much longer and more volatile than large companies which have the benefit of investor confidence for a long period of time. A disciplined approach to investing in good quality companies over the next few months can be a good strategy to make the most of the lower investor appetite for mid and small-cap companies during a tough macro environment.

What is your advice to long-term investors?Should they accumulate or wait on the side-lines?

For long-term investors, anytime is a good time to invest. In the current scenario, one should start investing rather than only wait on the sidelines as valuations for most companies have become reasonable from a long-term investment perspective. Historically large caps are the quickest to recover followed by mid and small caps. One can use this analogy and plan to invest accordingly.

Best time to invest is when market sentiment is negative:  Sushant Bhansali, CEO, Ambit Asset Management

The best time&nbsp;to invest in quality companies&nbsp;whether&nbsp;it's the large, mid or small-cap is when market&nbsp;sentiment is negative said Sushant Bhansali, CEO, Ambit Asset Management in an interview with MintGenie.

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