Mr. Manghat has an experience of 23 years in equity markets in India. Prior to joining L&T Investment Management, he was Co-head of Equities at Tata Asset Management. He has worked for more than 16 years with Tata Asset Management Limited having joined as a Management Trainee and has worked in various capacities including as dealer for equity & debt, as research analyst for equity & credit, as Head of Research and managing some of the key equity and hybrid schemes for the company. He started his career as a research analyst on the sell side before joining Tata Asset Management.
Mr. Manghat holds a Bachelor of Mathematics degree and an MBA in Finance.
Answer : The coronavirus brought on the worst global pandemic in over a century. This black swan event and the last few months have taught investors several lessons, if not reminded them of some basic truths. Some of these are
The market is forward looking and predictive rather than reflective. An investor waiting for a turnaround to happen like the approval of the first vaccine would have missed the rally. It is also a reflection of sentiment and not just current economic data.
- Timing the market is incredibly difficult and exiting during a sell off often does more harm to your portfolio in the long term. You are far better remaining invested in the market rather than trying to jump in and out based on forecasts and short-term events.
- In bad times companies adapt to changing conditions, as the pursuit of survival and profit encourages adaptability. For example, the pandemic has certainly accelerated the need for increased digitilisation and automation.
- Fear drags everything down including something that stood to benefit from the change, like a technology company. However, it does seem to have a shorter shelf life in the market compared to hope. It pays to be greedy when others are fearful.
Answer : Valuations are a function of fundamental factors like earnings growth as also of cost of capital, liquidity etc. While, optically, valuations look high on a headline index basis, there are stocks in the broader market which are relatively cheaper compared to the front-line index. Also, earnings growth has been subdued over the last few years, while markets have moved up. As earnings growth pick up, this valuation excess will tend to normalise. COVID-19 has resulted in developed and emerging countries to adopt convergent fiscal and monetary policies leading to lower cost of capital and the current expectation is that these low rates will remain for some time. Hence it is possible that higher valuations sustain for longer.
Answer : Post Pandemic, India is witnessing sharp recovery in economic growth as reflected in GST collections, power demand, E-way bills and other economic activity indicators. Economic growth is getting a push through govt. spending and incentives. Given a low base & a better than expected recovery, near term economic data is likely to show improvement. This is aided by low interest rates, government support to industry and a cyclical upturn, apart from bunched up demand in many sectors. Hence FY’22 should be a normalisation year. Pain areas are stress in MSME segment including unorganised sectors and the sectors with direct impact like aviation, hospitality, entertainment etc.
Answer : With a recovery in the global economy, we have seen inflation and inflation expectations increasing and bond yields have started rising in line with this trend. While we can say that the downtrend in rates is now possibly done, the expectation is that a low interest rate environment will continue for some time to support the economic recovery. Low interest rates contributed to the valuations of stocks going higher. As and when rates rise or there are expectations of a rate increase, the market valuations could adjust lower. Also, there has been a significant increase in flows to equities across the World, especially to emerging markets, with strong liquidity and near zero interest rates in the developed economies. Some of these flows might reverse if interest rates move higher.
Answer : Over the last several years, we have remained true to label investors with the investment strategy of each scheme consistent with its investment objective, despite the market volatility. Broadly, our investment strategy across schemes follows a bottom-up approach while investing. We evaluate companies on multiple parameters like business potential, management quality / ability, capital allocation & returns, competitive advantages, profitability, threats from disruptive forces, relative valuations etc. In general, we try and keep the strategy simple, which is to buy good quality companies at reasonable prices depending on the scheme objective and stay invested for long periods of time to let the businesses compound in value.
Answer : I would suggest existing investors to remain patient and not get carried away by the volatility in the markets as long term gains from equities are expected to be better than other asset classes. With that perspective, corrections like the one witnessed last year should be bought. Having said that, one should not get carried away by the sharp rally seen in markets in the last few months as it has come after a severe correction and capitulation. Over the last decade, we have been witnessing increased volatility and the cycles are getting shorter. Given this background, I would suggest new investors to take exposure in the market through funds and preferably through systematic investments (Systematic Investment Plan or Systematic Transfer Plan). What is important is the time spend in the market rather than timing.
HAPPY INVESTING.....
HAPPY INVESTING.....