India has always been a stock picker's market. While the broader market has gone up, there are several pockets of underpricing that can be capitalised, said Siddharth Oberoi, Founder and CIO at Prudent Equity. In an interview with MintGenie, he advised investors that the focus should be on individual stocks offering valuation comfort and where growth potential is intact for the next 12-24 months. There is nothing called defensive in the equities market. Any quality investment is good at one price and not good at another, he added.
After a sharp run since April, do you now expect the markets to undergo consolidation or will the record-high trend continue?
India has always been a stock picker's market. While the broader market has increased, there are several pockets of underpricing that can be capitalised. Q1FY24 results were a mixed bag with no lead sectors. Hence, the focus should be on individual stocks offering valuation comfort and where growth potential is intact for the next 12-24 months.
What has been your strategy in the all-time high markets?
As the valuation comforts dissipate, our strategy incorporates special situations that have reaped market-beating returns for our fund. Even though the top picks remain in the banking and infra space, we ventured into Railways, Pharma, Chemicals and a few other sectors as well. Using this strategy the fund has delivered 40 percent returns since January 2023
What themes should one explore in FY24?
The focus should be on areas where growth visibility comfort exists for the next 12-24 months. Investors should still look out for Infrastructure stocks. Railways is one sector which is getting frothy. Investors should tread cautiously as valuations are reaching closer to their intrinsic value.
Are you satisfied with the RBI policy decision?
The stance from the governor was in line with expectation; the only thing which all of us need to be watchful of is inflation, with crude rising sharply in the past few days, erratic monsoon and rising prices of vegetables and a few other soft commodities.
What opportunities do you see in the markets after Q1 earnings? Should one move more towards defensive names?
There is nothing called defensive in the equities market. Any quality investment is good at one price and not good at another. One should be disciplined in one's investment approach and ensure risk-reward is in one's favor.
Does the election next year pose any risk for Indian markets?
Since liberalisation, there have been many elections and different political parties coming to power. Yet the capitalist system unleashed has delivered it for India throughout that time. I don't think elections would cause any upheaval.
Do you believe the valuations of mid- and small-cap stocks have become expensive? Should investors stay away?
Broadly, the stocks in mid and small-cap space have become quite pricey. There is a massive valuation bubble in some companies. However, even now, there exist companies that can be picked up at throwaway prices. One's focus should be on identifying such stocks.
One piece of advice for new investors?
Understand and identify what investment style suits you. Inculcate a disciplined investment philosophy and ensure the temperament to stick with it.