In an interview with ETMarkets, Jain said: “To our surprise, investors have shown interest in fixed income in the last 5-6 months. We have received multiple queries on 7.6% /7.7% GOI bonds.,” Edited excerpts:
The new year started off on a muted note amid weak global cues. But, benchmark indices have managed to hold on to crucial support levels. Do you think a pre-Budget rally is in place?
Thanks to retail flows, we managed to remain stable as far as the broader index is concerned; however, most of the quality large cap and mid-cap, have seen a correction of 10%-20%.
As far as the budget is concerned, for the last 3-4 years budget has remained non-event for the market, and most of the policy decision has been announced separately. We don’t expect any pre-budget rally.
What are your expectations from Budget 2023?
I think the budget is likely to be growth oriented with more support to the rural economy (food & fertiliser subsidies) rather than an out-and-out populist despite the upcoming general elections next year.
I think the government’s fiscal math is already in place, and they may not like to tinker with it.
I would like to see the rationalisation of capital gains tax on various assets in terms of holding periods and rates.
Which sectors are likely to be in the limelight in Budget 2023?
Considering the general election in 2024, we expect rural and infrastructure-centric stocks to remain in the limelight.
Rural-centric stories, e.g. 2W/Tractor, Fertiliser, and Infra-centric stories, like Construction and Railways, should be watched out for.The fiscal deficit has touched 6.4%, so we do not expect many election-related freebies.
Which sectors will lead markets in 2023 – will the winners of 2022 continue to dominate market action in the new year?
Based on the assumption of a higher interest rate environment continuing for CY2023, we expect expensive consumer stories to continue to underperform in CY23.
While the winners of CY22, e.g. PSU banks, Private Bank will benefit from a higher interest rate environment in CY23 as well, we do expect Construction/Railways/PSU Banks/Private Banks to continue to outperform in CY23 as well, while Metals (driven by China re-opening) can outperform in 1HCY23.
IT can be a dark horse because valuation has become comfortable.
What do you make of the December quarter results from the IT sector? What is your pecking order?
IT sector has reported decent numbers:
a) +2.5% QoQ growth,
b) 40-50 bps margin improvement QoQ
c) Total Contract Value (TCV) remains strong for front-line stories.
has, in fact, raised guidance by 50 bps.
So as mentioned above IT can be a dark horse for CY23 subject to the revival of the US market (not the economy). Our pecking order would be Infosys/LTI Mindtree.
Where is the smart money moving in 2023? Have you spotted any early trends?
To our surprise, investors have shown interest in fixed income in the last 5-6 months. We have received multiple queries on 7.6% /7.7% GOI bonds.
Various companies have come out with a +10% NCD, which is very interesting. Apart from that, we have seen HNIs taking interest in small-cap companies like (<₹ 500 cr m-cap), we recently concluded our annual conference, where we presented at 60 small-cap companies, and the response was excellent.
Which sectors are you overweight and underweight in 2023?
As a setup, we work on absolute return. Hence, we don’t look for overweight/Underweight. That said, we are cautious about highly expensive stories and focus on value-based stories that grow.
Therefore, we are positive about Construction / PSU Banks / Private Banks /Auto / Metals, doing SIP in Technology and avoiding expensive consumer names.
What do you make of the huge SIPs coming into MFs, which have now consistently hovered above Rs 13000 cr. There is a lot which has to unfold for Indian equity markets. What are your views?
There is no doubt that SIPs played a crucial role in stabilising the market from the onslaught of FPI selling. Last year FPIs sold equities to the tune of $33 billion. Despite such heavy selling, our markets remained resilient.
MF investors have started to see the benefit of SIPs. Moreover, with investor education and MFs becoming affordable and easily accessible, we will see steady growth In SIP numbers and AUM in the coming years.
How should one play the small & midcap theme in 2023? We have seen most flows coming into this category.
Nifty Midcap and Small cap were down -3%/-10% in CY22, which provides an interesting hunting ground for Investors.
The flow you are talking about has also gone to micro-cap stories (<500 mcap) like some SME stories, which have given crazy returns.
We are cautious about micro-cap stories because valuation has become 20x-30x for unproven/untested businesses.
If someone plans to put Rs 10L now in 2023 – does it make sense to go all in or via the SIP route?
I have been a staunch proponent of asset allocation and systematic investment. Accordingly, I would like to break the amount of Rs 10 lakh among equity, debt, and gold.
For equity, I suggest a combination of large and midcap funds through the SIP. For debt, one can look at high-quality bonds/NCDs with good yield and ratings and a 5-10% allocation to gold through SGB or Gold ETFs.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)