“For investors with lower allocations (say, less than 25%), continuing with fresh investments through SIPs could be an option considering the economic growth that India offers,” Sanghavi said in an interview. Edited excerpts:
The market seems to be underreacting to bad news, as dips are bought, while good news seems already priced in. Do you agree? How expensive is the market now?Krishna Sanghavi:Yes, it is hard to disagree when we consider stocks as an asset class in most global markets. Sentiments towards stocks are driven by belief in favorable policy action by global central banks, continued fiscal expansion in the US supporting growth and providing liquidity and the one-way movement we have seen in the markets after Covid.
Indian markets are also trading at higher valuations, in line with global trends. As always, we have some areas with expensive valuations and few where valuations are reasonable. In terms of market cap, large caps are reasonable, while midcaps and smallcaps have high valuations, but are supported by investor flows.
Have the ratings forced you to save some of your gunpowder?
Krishna Sanghavi: While valuations are high in some areas, there are reasonable opportunities in some sectors where valuations are reasonable relative to growth opportunities. Large-cap companies like space are reasonable, while mid-caps and small-caps are expensive. asset allocation funds in which we have the mandate to hold cash, we have more cash (debt) while in pure funds equity funds, we have some cash as well as stocks that we believe are reasonably valued.Do you think market appetite for railway and defence stocks could be tested in the remainder of fiscal 2025?
Krishna Sanghavi: Typically, in an environment where expectations of a long capital investment cycle prevail, stock prices of capital goods companies are driven more by order flows and less by execution (profitability) in the short term until the assumption of the capital investment cycle changes. Therefore, we should monitor new orders from railway and defense companies.
What market segments are you looking for stocks in right now? How difficult is it to find stocks to buy at reasonable valuations?
Krishna Sanghavi: We are looking at companies whose valuations are reasonable, in the context of underlying growth assumptions. Companies in sectors such as financials continue to report healthy growth, while in the oil and gas sector earnings may get a boost based on the GST Council Result on gas and petroleum products.
How would you like to sum up the first quarter earnings season? Great review for YOU!
Krishna Sanghavi: First quarter results have been in line with expectations of low year-on-year growth. NSE500 companies have reported 7.4% earnings growth in the first quarter. Sector-wise, BFSI companies have reported good earnings growth compared to non-BFSI companies. Within non-BFSI companies, non-commodity companies have reported healthy growth, but commodities (oil & gas, metals, cement) have weighed down overall earnings.
What should be the best asset allocation strategy at this time when the market has been constantly reaching record highs and there are almost no bearish investors left? Is it better to postpone some of the investments?
Krishna Sanghavi: Asset allocation for investors depends partly on market valuations but mainly on the prevailing asset allocation. For someone who invests heavily (say 75% or more in equities), allowing existing investments to continue and postponing fresh allocation may be a better idea. While for investors with lower allocations (say less than 25%), continuing with fresh investments through SIPs could be an option considering the economic growth that India offers. For investors who prefer lump-sum investments, funds with large-cap mandates and/or asset allocation funds could be a better option.
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.