NEW DELHI: 2019 will be a volatile year and investors must ride it to make the most of the election year.
This was the gist of ETMarkets Global Summit masters panel, consisting of Saurabh Mukherjea of Marcellus Investment, Bharat Shah of Ask Group, Navneet Munot of SBI Mutual Fund, Vikas Khemani of Carnelian Capital, and Amisha Vora of Prabhudas Lilladher.
The considered view was uncertainty is and will be part and parcel of the market while select pockets such as pharma and well-funded banks may be in for good times. Manufacturing and capital goods sectors are likely to make a comeback.
Learn to live with volatility
“Volatility is the beast and we will have to learn to live with it in days ahead,” said Munot.
Global debt as percentage of GDP is much higher today than it was 10 years ago. India to grow at a rate from a global perspective is going to be tougher and tougher, he said.
According to Munot, corporate profits have come down as a percentage of GDP. “Corporate saving as a percentage of GDP has gone up, which should revert and power the capex cycle soon,” he added.
Domestic flows a big driver
Super cheap money that characterised last 10 years is gone, observed Mukherjea. Risk assets have a far tougher climb ahead, he said.
That said, domestic savings flow to Indian market and its resilience will help India do better, Mukherjea said further.
Worst over?
Khemani made the point that India is done with its worst phase of over the past 4-5 months.
“We are in a very interesting phase right now,” Khemani said, noting that the recent dovish US Fed remarks have changed the course of market.
The expert said most local issues are settling down and the environment globally is more comfortable.
“Growth globally is moderating. A moderate global growth is very good for India. We have soft commodity prices. I believe that trade war will help Indian manufacturers. While we may witness some volatility on the political front, I see a better 2019 than 2018,” Khemani said, adding that earnings so far are not that bad and will not disappoint in 2019.
Investment mantras
Shah maintained that essential principles and ideas always remain the same. Path to good investing is very narrow, he pointed out, adding that one needs to tread carefully.
“Many times, I find that over analytics does not help investors. If macros matter so much, you may be dealing with a short run of the business cycle. If you are an investor in a business, you should think more about long-term business prospects. Interest rate movement only affects our minds, and not businesses. It is only our mind which will go through cycles. Quality businesses always grow through all these headlines, be it interest rate cycle, rupee turmoil, crude price volatility,” Shah said.
Mukherjea chipped in, saying investors must go back to classical investing. "If you buy great compounders, you will make more money," he let out. His message is simple: Always buy businesses at right valuations.
What investors need is "a business with belief written all over it". “I like Maruti in the long run despite headwinds in the form of metal and oil prices,” she said.
Favourite bets
Khemani sees a lot of tailwinds for the manufacturing sector, saying the sector would create a lot of value. The expert noted that a lot of banks and NBFCs did not participate in the recent recovery.
“I am very positive on wealth creation for a 10-year perspective. India will not disappoint you,” he asserted.
Mukherjea believes that well-funded banks will do well going ahead, but feels that the honeymoon period is over for NBFCs. Pharma sector, he said, has taken a big hit.
"Interest and growth will be back into discretionary consumption, which faltered in the past one year. NCLT has brought logic back into lending. Capital goods, corporate banks are a place to find good business. Always buy businesses at right valuations. I think we are going to get good businesses at very throwaway prices," said Vora.
Her assessment is the rate cycle is looking very benign and easing interest rate will back discretionary consumption play, which lost some ground in the past one year.
Election outcome and D-St
Vora was spot on when she said the state election poll outcome on December 11 will give a good indication of where we are heading from the market's perspective.
The market, she said, has discounted a reduced BJP majority. “In case of the worst scenario, the premium we are enjoying will go away. Earnings for India Inc not be impacted, but rating will be impacted if the outcome is totally negative,” she was clear.
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