The current correction in the market is healthy and an eventual opportunity for investors to make changes in their portfolios, said Anup MaheshwariJoint CEO & CIO at IIFL Asset Management Company.
"These kind of corrections are good in terms of the long-term profile of asset class and an opportunity for investors. One will have to make some changes in portfolios,” Maheshwari said.
About expectations from the monetary policy tomorrow, Maheshwari said, "Consensus belief is for 25 basis points hike and market is not likely to take too much cue from the rate hike because it is clear where it is headed directionally. So 25 or 50 basis points will not make much of difference."
Edited Excerpts:
What are the thoughts right now on the kind of pain that the market has seen? Initially, it was only about the broader market but last two weeks we have seen big selling in even the stocks like the Bajaj Finances, the Tata Consultancy Services (TCS) of the worlds?
This is natural, I guess in equity markets, volatility is the always a part of it. I think we all walk into the asset class knowing well that is part of it and clearly quite a few factors have come together this time around in a very short period of time which has probably accelerated little bit of fear.
The fact is whenever liquidity is tight, interest rates are heading up. It is bound to have some negative effect on asset class and the consequence of that is earnings do get downgraded eventually. So, while we were just about to start off better earnings, the trend has been bit punctured in a short-run.
These sort of corrections, I guess are always needed, good in terms of just a longer-term profile of the asset class. So, in a sense we look at correction always has eventual opportunities where some business gets stronger and some get curled out.
You are seeing that sort of a phase where some businesses will emerge much better and some will much weaker. There are certain portfolio changes that you need to do at a time like this in terms of conditioning it.
It is quite clear now, you have had a few speakers also in terms of what changes need to be done. So, some of the performing sectors will clearly correct little more.
This will definitely be a bit of ajar for several crores of investors who walked into the mutual fund industry last year. We saw a seminal rise in mutual fund flows, we also saw a similar rise in mutual fund investors and the number of accounts. For them, this is the first time that capital itself has eroded. How was September for you and how you do you expect October to be in terms of flows?
For us specifically, it is a very different book of business. IIFL AMC is largely in the alternate space where we have about a $4 billion book. Therefore, we are not the best indication of what is happening in retail flows.
So, the industry numbers are out there for most people to see. The way I see it, obviously, people who have come in a year ago would be hurting a little bit. But what is important is to see this SIP (Systematic Investment Planner) flow maintain its consistency because the whole challenge in this asset class will eventually generate the return.
The issue is, do you have the patience to sit through it and allocate your money properly. I think that is as important as just investing itself. If you keep it going through this phase and I think, eventually things will get better. We have seen enough of these cycles in the past and a lot of these factors tend to be more temporary then permanent in nature.
The only challenge is that you have to keep investing through that phase to get the benefit of the eventual upside that will come. I am clearly hoping that the SPI flows don’t see too much of a change in trend, but it is quite logical to assume that there will be some shorter-term outflows from more short-term investors.
I wanted your thoughts on the slowdown that we have seen in the consumption space, specifically to do with some of these pockets like autos. Are you recalibrating your growth projections for the consumption space and how would you approach some of these laregcap auto names now?
Definitely recalibrating. I think all of these companies will start eventually guiding down a bit lower. The fact of the matter is there is a lot of macro stuff at play here.
The deficit that we are running clearly needs to be addressed partly through either much weaker currency or some degree of slowdown in the system.
A lot of that slowdown is most likely going to occur in consumption. Higher interest rates also don’t really help. It is logical to expect a bit of a consumption slowdown and everyone to notch down their numbers. It will vary, of course, from company to company, but autos will be one segment that should take the negative effect of that.
People are going to wait till the sort of guidance numbers start getting toned down by companies which we should start seeing that over the next few months. But consumption, I would say it is a short-term air pocket, the longer term theme doesn’t really change much.
So, from an investor standpoint, obviously as I said, short-term portfolio calibrations are fine but long-term it is not that the whole consumption story gets wiped out with a one-year air pocket, I mean these are just part of that journey I guess.
