“The risk of not being in the markets is much higher than the risk of being in the markets. We continue to advocate disciplined investing in markets with a medium to long term view,” Jajoo says.
Edited excerpts from a chat:
How would you read the market’s resilience to bad news?
Well the kind of resilience which the market is exhibiting is indeed strong but not way off the mark. We need to acknowledge the fact that Corporate profit as a % of GDP for FY23-24 are the highest in the last 16 years. The last time we had witnessed this figure in FY07-08. However, post FY08 the markets were impacted by a series of negative events like Global Financial Crisis, policy paralysis in India, among others.
This time we are witnessing a scenario where globally interest rates have peaked and are directionally headed downwards. In India, crucial events like the General Elections and Union Budget are behind us. Equity markets always tend to look forward. The fiscal deficit guidance presented in the Union Budget for FY25-26 at 4.5% is quite commendable and makes a strong case for a ratings upgrade (last upgrade took place in 2007).Overall corporate earnings have been in-line with expectations and coupled with a good monsoon this year, we are witnessing positive news flow not only from rural India but also from export dependent sectors like IT and Textiles.How much of a bias towards keeping your powder dry has increased post Budget in your portfolios?
Our portfolios are very well diversified across sectors, and we do not take aggressive cash calls.The Budget had little or nothing to offer for rail and defence stocks. Do you find them expensive following the bull run in the last couple of years?
Well, one can generalise that the sectors have become expensive. However, we as a house adopt bottom’s up approach in selection of scrips. There are companies available in the sector which have robust order books thereby providing visibility with regard to robust earnings over the next 2-3 years. This could result in these companies reporting significant improvement in return ratios going forward. When one correlates the present share price with the earnings of FY25-26, there are select companies in the aforesaid sectors which could be worth investing and are a part of our funds.
Which pockets of the market are you hunting for stocks at this stage? How tough is it to find stocks to buy at reasonable valuations?
As mentioned earlier, selection of stocks is a bottom’s up approach that we follow. Yes, there are challenges in identifying scrips at reasonable valuations. However, the country is one of the fastest growing economies in the world, the “growth companies” in India would continue to command a premium for the visibility in earnings that they offer.
How would you like to summarise the first half of the Q1 earnings season? Full marks to IT? What about banks?
IT sector commentary has turned positive compared to what it was 6 months ago. Banking sector is one of the most reasonably valued sectors compared to others.
What should be the best asset allocation strategy around this time when the market has been consistently hitting record peaks and there are hardly any bears left? Is it best to postpone some of the investments?
The risk of not being in the markets is much higher than the risk of being in the markets. We continue to advocate disciplined investing in markets with a medium to long term view.
