There are certain questions in the minds of an investor on which could be the best available choice. Devang Kabra, Partner and Co-Fund Manager of Wallfort PMS, tells Mangesh Kulkarni that the investor should stick to the investments despite the fear of volatility. Excerpts…
Q. The Indian stock market has given stellar returns in the last four years. Nifty 50 has risen by 200 per cent, small cap index has risen by almost six times from COVID lows. Should investors book profit, or is there an opportunity for fresh investment?
A. It depends on the time horizon of the investor. On broader index levels, the indices are likely to go into consolidation for 3-6 months. However, we invest with a mid to long term view and not with a short-term view. Hence, one should ideally ignore this volatility and stick to the investments. Probably, the volatility will give a chance to buy more of the chosen stock. We don’t believe this temporary volatility impacts India's structural story.
Q. Private sector banks have underperformed the broader market in the last three years. What is your view on these stocks?
A. Currently, the Private sector banks are facing a double whammy of tight global liquidity and reducing domestic deposits. Their cost of funds is dear compared to pre covid days. Their balance sheet performance and hence stock performance would largely depend on their NIM increase. On the international front, one has to keenly observe the FED interest rates moves and the effect on inflation and global liquidity. On the domestic front, one has to keenly observe what Indian Government and RBI does to motivate investment of households in FD's (which is currently moving out to alternative financial asset classes because of returns and taxation).
Q. On which sectors you are currently over weight?
A. We are overweight on manufacturing and luxury consumption theme.
Q. How much return has your oldest PMS given in the last five and 10 years?
A. Our five years IRR has been 41 per cent.
Q. Which is that one theme in which you are extremely bullish in the current market?
A. We are bullish on manufacturing theme.
Q. Mutual Funds Vs PMS - which option is better?
A. Mutual Funds are best for an investor starting off in life or in the early stages of his financial investment journey. Once a decent corpus is built after consistent 5-10 years of investing in Mutual Funds, the investor can shift to PMS. In terms of absolute returns, PMS will always outperform MF. However, in PMS, there is a barrier of investment size. Hence, the suggestion to build a decent MF portfolio before venturing into PMS investments.
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