New age businesses are bringing diversity to the stock markets and investors’ wallets. Also, to be noted is the fact that many of them have acquired material sizes in a relatively shorter period of time, Rahul Bhuskute, CIO, Bharti AXA Life Insurance – said in an interview with Zeebiz’s Kshitij Anand.

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Rahul is a tenured investment professional with over two decades of diverse and extensive experience across organizations such as ART Special Situations and ICICI Group.

Edited excerpts:        

Q) Indian markets cooled off from highs amid weak global cues. What is your view on markets? Is it because D-Street seems to be factoring sooner than expected rate hike?

A) Increasing inflation has become a strong narrative for market movements across the world, more so as it is happening after a significant period.

While recent Indian inflation prints have been relatively lower due to the base effect, the markets have been taking global cues on this issue, including increasing US yields.

Further, RBI is taking efforts towards liquidity normalisation. So, while a rate hike might not be imminent, the above issues might continue to affect Indian markets.

The equity markets, however, have seen a sharp run-up in the past year and are trading at elevated valuations. This may act as a near-term cap to stock performance. On the other hand, as earnings growth continues over the next few quarters, we could see another leg up to the markets.

Q) Nykaa made history while Patym failed to meet expectations of institutions. What are your views on the long-term potential and why there is such a stark difference in the subscription status?

A) The business models of the two companies are not comparable, so it would not be fair to compare their subscription status.

The long-term potential of both companies does appear promising; however, one also needs to look at valuations, and not just potential while investing.

Q) What are your views on the IPO market for the rest of FY21? The new age businesses are difficult to interpret and many of these themes will make debut in next 3-4 months. What are the key parameters to look at?

A) FY22 has been a very promising year as far as IPOs are concerned. The pipeline has been strong throughout, quality IPOs have been received very well by the market and most of them have also had good post-listing performance.

The new-age businesses might be slightly new to the Indian markets, but have had solid proof of concept in terms of potential translating into growth, and growth translating into material market capitalisations in other markets such as the US, UK, China etc.

These are also bringing diversity to the stock markets and investors’ wallets. Also, one should note the fact that many of them have acquired material sizes in a relatively shorter period.

One should also understand that parameters vary from sector to sector, but long-term business potential appears promising irrespective of industry.

Q) What cues are you getting from September quarter results? Do you think that earnings could take a hit in the coming quarters?

A) The September quarter results have been mixed with strong results from sectors like IT and Banks, and muted profitability from sectors like consumer durables, cement, and chemicals.

Companies have reported strong revenue growth during the quarter. However, most have been hit by higher raw material prices and fuel costs, which have dented margins.

Several companies have also demonstrated strong pricing power and are passing on the higher costs to the consumers. With the high-cost environment gradually easing, we expect to see margins recover, thereby keeping us positive on the earnings momentum.

Q) Which themes are making a comeback – the reopening trade?

A) The reopening trade is definitely picking up with sectors such as Cinemas, Hotels, Aviation etc. doing well.

We are also seeing a recovery in domestic cyclicals including Industrials, Banking and Real Estate, all of which benefit from the reopening of the economy.

Q) What is your call on the auto space?

A) The worst may be over for the Auto sector as there is a gradual recovery in domestic demand and improvement in the global availability of semiconductors.

However, the chip situation remains dynamic even as manufacturers have indicated an improvement in availability in the current quarter compared to the previous quarter.

Commodity inflation has also started to moderate, and this could signal a bottoming out of margins for the sector.

Q) Stock exchanges to start T+1 settlement from Feb 25, 2022. What are your views – is it a step in right direction? FIIs had some reservations with respect to this move. What are the possible impacts on D-Street?

A) T+1 settlement is likely to be introduced in a phased manner.  It would start from lower market cap companies and move to higher market cap companies. SEBI believes it would be beneficial for investors as funds will be received earlier.  
FII reservation is more to do with operational issues surrounding the new norms which should also gradually get addressed.  

Q) Inflows in equity MFs were the lowest – but SIPs continue to rise and shine. What does the trend suggest?

A) Rise in SIPs is a healthy trend; ordinarily, retail investors are pro-cyclical investors and often get their timings wrong. Discipline in SIPs is good for investors and for the overall investment ecosystem.  

Q) You have decades of experience under your belt. What is your winning strategy to picking stocks?

A) Disciplined approach to investing is the best way to reap good returns in the markets. We deep dive into the fundamentals of every company, including potentially robust earnings outlook, growing industry opportunity and good management, to build strong conviction on our investment.

It is equally important not to become a prisoner of conviction; if facts change, views have to change. Global factors are becoming favourable for Indian markets; and therefore, one needs to have a wider lens. Lastly, investment needs active decision making on almost a daily basis.

Making decisions, sometimes with inadequate or confusing data, and doing so while avoiding/mitigating biases is very important.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)