Sales growth has moved up from 7%-8% last year to 12-13% this quarter. I would take some hope from that and still stay invested, said Prateek Agarwal, Business Head & Chief Investment Officer, ASK Investment Manager, in an interview with ETNOW.
How are you perceiving the current market move particularly in the global context? Every day, we have a really long list of what could be perceived as bad news as the market seems to be steady at the moment. What is the next step from here, how do you see things panning out?
Last year, brought with it a realisation that the peak growth in profits in two large economies US and China is probably behind us. These two markets in terms of asset allocation may be accounting for close to 50% and have done very well. So, that 50% or 55% will be reallocated to other spaces. So, it is not only us, but the entire emerging market pack which is seeing a sea of green. That has been the case from the beginning of the year itself.
End of February, we had a peculiar situation. The rest of the world was up and India was one of the very few markets which was 2% down. But then, for various reasons including the fact that we now seem to be one of the faster growing spaces and some of our concerns are getting addressed, over a period of time we also participated in the global rally.
March saw a very sharp up move. Post that, we believe that valuation comfort from a large part of the market has gone, especially in a situation where consumption seems to be slowing down. We believe this could sustain because the story still remains intact. We are looking at strengthening of growth prospects as we go forward. We tend to get very much bogged down by the profit growth numbers and that number has been very volatile because of several one-offs. I guess if we look at the sales growth numbers, then sales growth has moved up from 7%-8% last year to 12-13% this quarter. I would take some hope from that and still stay invested.
Would you say that at around 11700. the best is already baked in and in the price?
As I said, valuation comfort does not lie after the 8% odd jump in the market over the past one month. We are pretty finally valued practically across the spectrum. Maybe to our mind, financials still offer some bit of an upside. That said, we believe there is a great chance of the market holding out strong through the election and after the elections. We sense that a lot of money have gotten staggered before and after election and wanting to be on both the legs because the election outcome at the end of the day is uncertain.
We also do sense that there has been significant postponement of investment by foreign money till after the uncertainties are resolved. If the uncertainty resolves, we should expect sustained flows for some time. That said, there is this MSCI and focus has to be kept on that.
If China weightage goes up, India will see a reduction in weightage and that could amount to a very significant cut in flows. But that happens in September-October, later in the year rather than just after the elections.
Financials and tech are where you are seeing potential. Talk us through the kind of upside you are anticipating, the kind of growth you are looking at when it comes to both these segments. Even on valuations you are seeing comfort particularly when it comes to IT. Talk us through that.
I just talked about financials. IT is one space which is growing. I would say growth is accelerating. However, it would still be in early teens or just about there. It falls significantly short of what we want from our businesses and hence we have largely stayed away while we have some exposure there.
In terms of financials, that is one spot in the marketplace where the growth and valuation comfort and the combination exists like no other space. It is not across the board, it is not in standard products. People tend to confuse corporate lenders and retail lenders. Retail lenders were better before, corporate lenders are better now etc.
It is in non-standard products where the specialised entity alone is able to do well and hence can continue to grow for a length of time. The spaces that we are positive about are credit cards, personal loans, SME loans, two-Read More – Source