The market has outsmarted most analysts’ predictions of being in the red following Fed’s announcement of interest rate hikes. Basant Maheshwari, Co-Founder & Partner, Basant Maheshwari Wealth Advisers LLP in an interview with MintGenie explains how pessimists and optimists view the market differently. However, it’s the optimist who makes the big money.
Q. Markets will show a continued uptrend after a period. This is the norm. Till then, what advice would you give to your investors regarding the creation of a portfolio strategy?
The market these days acts like a bi-polar eccentric. The best way to handle this is to avoid tracking and reasoning them move by move. Excessive participation with little experience creates these wild moves. More people nowadays trade on prices and not fundamentals. If you have seen the pain and held on all this while don’t sell out the moment you hit the brake. If the companies make money so will their investors. One has to focus on the fundamental character of the stocks that he has bought.
Q. Portfolios are hit by inflation. Which sectors should one focus more to bypass the impact of inflation?
Inflation is fast reversing. The world cannot handle high-interest rates because there is a huge sovereign and consumer debt overhang. So, the central bankers will look for an escape route to go back to the lower interest rate regime. Brands and companies with pricing power like consumers and other monopolies do well during inflationary conditions because they can pass on the high input costs, whereas banks, autos and capital goods do well when the interest rate comes down.
Q. Many stocks are looking attractive due to low valuations. Do you think that the market is still due for more corrections?
The overall market has discounted the worst and made a bottom. It is now looking ahead. Investors should look to deploy whatever they want to equities instead of waiting for better prices to invest. If you are waiting for clarity then you will also have to pay the price for that clarity. Strangely, the market appears blind and acts in panic for the ultra-short term but has binocular eyes for the long term. And right now, it’s seeing the better days ahead when compared to the period just gone by.
Q. Which sectors seem attractive to you from a five-year perspective?
Consumer brands, retailing, Midcap tech, agri-commodities and a few NBFCs look good from a five-year perspective. But investors should have the power to hold on to these stocks. Many people talk of five years when they buy but start calculating the returns from the fifth week.
Q. Do you still foresee a bear market rally or are we out of the woods?
The bear has gone to sleep. It’s party time for the bull. But to think like that you have to be an optimist first. Pessimists write good stories but it’s the optimist who makes the big money.