“We’ve seen over the course of the last 18 months or so that risk has been disproportionately rewarded, especially as we move down the curve, whether in terms of midcaps, smallcaps and, more so, microcaps. In this context, what we’re doing in our portfolios is basically moving up the curve. We’re trying to consolidate our holdings,” he said.
He believes that while value as an investment strategy has performed well over the past two to three years, there has been a shift towards quality over the past eight months.
While he does not expect any significant decline in the market, he advises caution as corporate earnings growth may not be as strong as before.
“It makes sense to be in fewer sectors where there may be a potential improvement in revenue growth,” he said.
He has a significant position in the pharmaceutical sector, is overweight in the IT sector and is generally positive on the consumer side.
Cement has been consolidating, but companies in the sector have the potential to improve margins, Krishnan added. “We believe cement is an indirect driver of energy prices because every stage of the value chain is essentially about transporting energy, and lower energy prices can help improve margins. So that would be a sector where we have a contrarian view.”
Krishnan does not expect panic even if there is a US recession, as that has already been largely factored into prices.
Read also | Barclays economist rules out US recession
As for initial public offerings (IPOs), Krishnan said he has been selective. He has invested money in about one in five IPOs in the past three months, he said.
Many of these IPOs need to be evaluated.
Read also | Nifty 50 index climbs back above 24,900; consumer stocks hit new record
Vetri Subramaniam, Chief Investment Officer, UTI Asset Management Company, also participated in the conversation with Krishnan.
The only sector that Subramaniam, who manages $155 billion in funds, is completely comfortable with is banking and finance.
Subramaniam believes the small and midcap space is where valuations are very rich in absolute terms.
Read also | In summary: Five lessons from Ganesha for investors
“As an investor, the lesson I have learned over time is that prudence and risk management are the only way to stay in this game for the long term,” Subramaniam says.
The most important part of the compounding equation is not how fast one grows, but the period over which one can remain invested, he explained.
For more information, watch the attached video
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.