Correction and volatility can continue for a quarter or two based on the global macro risk-off environment, believes Shridatta Bhandwaldar, Head of Equities, Canara Robeco MF. In an interview with MintGenie, Bhandwaldar advised investors to focus on wealth creation through the compounding of portfolios over a longer period rather than getting bogged down by what is happening in the near term. Edited Excerpts:
Do you think this is the right time to invest or should investors wait for some more correction?
Investors should look at the medium-term risk-reward rather than trying to time the market perfectly. Given that earnings are expected to grow about 15 percent CAGR for FY22-24E, the market has come into a fair valuation zone at 16-17xFY24 PER now. Having said that, correction and volatility can continue for a quarter or two based on the global macro risk-off environment.
Is this the right time for investors to rebalance their portfolio or should they wait for a more stable market environment?
Investors should start rebalancing their portfolio toward equities over the next 6 months
What would be your advice for an investor who wants to start investing now?
Focus on wealth creation through the compounding of portfolios over a longer period rather than getting bogged down by what is happening in the near term. Equity portfolios have the potential to compound money at least in double-digit over the medium term – so focus on asset allocation and proportion of equities within that based on your risk appetite. Spend time in the market rather than trying to time it!!!
Most global markets have entered the bear territory, however, Nifty50 is still holding on. Do you see Indian markets following its global peers or we are likely to see some consolidation in the near future?
Nifty has been in a consolidation zone for the past 8-9 months. With the reversal of global monetary and fiscal policies, we will see the volatility and pressure to sustain for the next 1-2 quarters in the market.
However, we don’t expect a significant downside from here, if you look at the market multiples in the context of earnings growth expected over FY22-24E. The risk to this call is oil sustaining at >120 USD for a longer period of 1-2 years.
What are the key trends to look out for in the September quarter?
One should look out for a few trends, 1) Any growth moderation in the top-line for corporate India, 2) Gross margin trend to ascertain the full impact of commodity and energy price increases, 3) trends of growth in export sectors and 4) Increase in finance cost in the rising interest rate environment
In the March quarter, most Nifty50 companies reported in-line results, do you see the same trend in the June quarter, or do you see the performance of India Inc declining?
We see broadly similar trends except in certain sectors like commodities(ex-oil) and Cement. This decline is likely to be compensated by domestic cyclical like Banks, Industrials, Auto and energy sector.
Do you think it is the right time to increase the weightage of equity funds in one's portfolio? Or should one prefer more debt funds due to rate hikes?
For anyone who has a 2-3 year horizon, this is a good time to start increasing allocation towards domestic equities.
Small cap funds have performed poorly in the past few months, does that make them a good buy for the long term at current levels?
Small and Mid Caps, while have underperformed in the near term, still are outperforming large caps on a 1.5-2 year basis. The near-term underperformance here may continue till inflation uncertainty persist.
Overall, what is your view on midcap and smallcap stocks? Stay away or dive in?
Gradually allocate to mid and small caps over the next 6-9 months with a 3–5-year horizon rather than being very aggressive, till visibility on geopolitics as well as inflationary environment emerges.
