Kotak Amc News

Shibani Sircar Kurian, Senior EVP, Sr. Fund Manager & Head -Equity Research, Kotak AMC, says that a considerable number of stocks are trading almost 50% lower than their 52-week high. So, some degree of valuation comfort is coming in. We are approaching this market by looking at stocks with earning visibility. Largecaps continue to offer better risk-reward as compared to mid and smallcaps as a pack. However, within mid and smallcaps, there are definite points of opportunity and we would use these corrections to look at these particular segments and stock in terms of allocation. Help us with your take on the markets because some are calling out a near-term bottom in place and also trying to look out for some more opportunities. We saw a bit of a rebound on Wednesday. What is your reading? Shibani Sircar Kurian: Since December of last year, the volatility has been on the back of global as well as domestic factors and some of these uncertainties still remain. However, what we must also understand is that when we look at markets, the Nifty itself has corrected almost 13-14% from its highs. Similarly, the midcap and smallcap indices have seen a greater correction. More importantly, at a stock level, the correction has been even steeper than what the headline indices seem to suggest.

Nilesh Shah, MD, Kotak AMC, says the returns we have seen in the last three and five years are unlikely to be repeated over the next three and five years. Last five years’ returns from Jan ‘20 to September ‘24 were about 21% for the broad market and about 30% plus for small and midcap. Those returns are unlikely to be repeated over the next three or five years. The returns could still be in the low double digits, if there is a fair possibility that India continues to deliver and our peers continue to score a self-goal. In the last couple of weeks, it has been local versus global. Globally, things are okay, locally, things are bad. Do you think this trend of local versus global will continue? Nilesh Shah: In some sense, local and global are two opposite sides of a coin and in some sense they are on the same side. If stock prices go up, both local and global investors benefit. But the driver for local and global investors could be different. Global investors have a much wider plate to invest into. Local investors, by definition, are constrained to invest in India. Global investors often come down or top down, though many of them have established offices in India.

Nilesh Shah, MD, Kotak AMC, says investors can’t go to Russia because of Ukraine; to China because of Taiwan; to South Africa because of social strife, or to Brazil because of the communist government. In the emerging market, there are very limited choices and India is one bright option. So with Triveni Sangam of flows, fundamentals, and sentiment, the downside is limited but expect volatility over the next 3, 6, 9, and 12 months. Shah also says this is the time when you should be long duration because rates are going to be cut. You should be long gold because central banks are buying gold. And you should be neutral weight to equity with some bias towards large caps. Sensex and Nifty are once again hitting record highs every day, even when there are worries about not-so-great Q1 earnings. Where do you think we are headed? Nilesh Shah: If we take a 5-year, 10-year view, no doubt the only direction is up. The economy will do well and markets will do well. If you are taking a 3, 6, 9, or 12-month view, I have no idea where we are headed. On one side, we believe the correction in the market will be shallow and short-term because there is Triveni Sangam of fundamentals, flows, and sentiment.

Nilesh Shah, MD, Kotak AMC, asks how can we become wealthy with an asset allocation where 93% of savings is not going to deliver real return. Of course, there are complexities and there is worry. But while investing in risk-taking assets like equities, bonds, debentures, and mutual funds, take guidance from experts. With their advice and support, one will be able to invest for real return. So, invest for real return, even though it means taking some risk. What kind of change have you seen in your personal, and professional life that is reflected in India so far as India celebrated its 78th year of independence? Nilesh Shah: My father died very early when I was very young and my mother was always dependent on me for her retirement. She never had enough savings and she was always spending to make us study and help us grow. Hence, she is dependent upon me as her retirement solution. But I can proudly say I have done my retirement solution through my money. That is the change I want to see in every Indian.

Nilesh Shah, MD, Kotak AMC, says Budget 2024 is like Suryakumar Yadav’s catch in the last cricket T-20 World Cup. It has achieved the trinity of the impossible – the path of fiscal prudence, support for investment in infrastructure, and generating employment to boost consumption. I hope and pray that eventually, this catch helps us become Viksit Bharat. The India story is centred around SIPs and mutual funds. There is cash and if the India appeal is centred around SIPs and not tips, one should not worry about it in time to move on. So, whatever changes have come on taxation, should that be ignored? Nilesh Shah: So, don’t ignore it. You have to take that into account. People who are trading in F&O now will have to bear higher costs and hopefully, they will reduce their trading activity. But from an investor point of view, the fundamentals have improved with fiscal consolidation, with investment focus continuing and hopefully with better employment generation, this growth is likely to be sustained. So, the valuation impact on the market will be far more from the Budget rather than the diluting effect of increased taxation. So, overall, the India growth story continues and instead of tips, do SIPs.

Nilesh Shah, MD, Kotak AMC, says many people depend upon their next generation and become a burden on them. It is important that we create financial security for every Indian through capital market participation whereby they can generate real return. How can you make a country rich when 93% of savings went into either below inflation or inflation return products? Only 7% went into above inflation return products. We have to ensure that the 7% keeps on increasing and Indians become wealthy.

Nilesh Shah, MD, Kotak AMC, says “we have advocated to our clients to follow the dharma of asset allocation. If you are leveraged into this market, please sell everything right now and reduce your leverage unless and until you are an exceptionally lucky or exceptionally skilled trader. If you are overweight into equity, this is time to book profit. If you were a brave person who bought during the Covid period, then you can hold on to your positions because you know how to manage risk. If you were that conservative person who sold during Covid period, then please book a lot of profit over here.” Shah also says: “Last year was one two ka three market, largecaps gave about 30% return, mid and smallcap about 60%, and microcap about 90%. Market does not move linearly. Investors who are coming into small and midcap funds should not expect what happened last year will be repeated in the next one year or two years or three years.” Let us talk about the elections and the market given the kind of correlation that we have seen for the last five consecutive Lok Sabha elections with the Nifty rallying between 3% and 21% just a month before the elcection, Now that there is more clarity in terms of the dates, what is your assessment? Nilesh Shah: This time, the market has already discounted the continuity of the government.

Harsha Upadhyaya, CIO-Equity, Kotak AMC, says it is definitely difficult to find value buys in this market, but there are several sectors which are likely to grow at a decent teens kind of earnings trajectory. Those are the names which will have potential to outperform the market. Maybe the volatility will increase, but still there is enough growth on the table. Upadhayaya further says: “It is not that mid and smallcaps will not give returns or correct a lot at this point of time, it is just that from a risk-reward perspective, it makes sense to have a little bit of tilt towards largecaps and that is what we have been suggesting to most of our investors.”

unlisted companies to go public, Motilal Oswal Financial Services' Chairman Raamdeo Agrawal said on Saturday in the backdrop of a record 42 lakh demat accounts opening in December, which he termed as the biggest economic event that has happened in India after 1992. Agrawal said that well-managed large unlisted companies would want to make their company live beyond themselves and it is only possible by listing the company and separating the management from the ownership and management of the company. Agrawal was speaking at BCAS’ ReImagine 2024 event organised by Bombay Chartered Accountants Society (BCAS) which is celebrating its Platinum Jubilee.

Nilesh Shah, MD, Kotak AMC, says “India today is trading at a premium valuation to others as the Spider Man movie said “with great power comes great responsibilities.” With higher valuation, comes higher expectations. Our headwind will be to deliver on those expectations. We are like Suryakumar Yadav or Virat Kohli, we are supposed to score a century every time we come to bat; a 10-run, 30-run cameo is not good enough.” Just taking a cue from your last tweet, who is going to win the race? Valuation or past performance? That is a very-very tough question.

Nilesh Shah, MD, Kotak AMC, says “no one would like to run a loss-making business for long. Today, we are doing this more as an experimentation with the bottom of the pyramid and ensuring that our technology, our communication, and our services are up to their expectations. But once we put in place the KYC cost and the transaction processing cost, then the industry will go all out in marketing this SIP. My dream as an AMC CEO will be to ensure that no Indians get lured by Ponzi schemes, but all become my industry's SIP investors and secure financial future.” The big trend which is happening is that SIP has become a household name now. It appears that now SEBI may look at taking a step forward for higher inclusion and reducing the minimum size to Rs 250. Will it make a lasting impression and much wider inclusion? From the AMC side, a Rs 500 SIP, how economic is it or is it that the larger, higher SIP part of the book, is subsidising this one because there are costs involved. What would you say?We have been running SIP for Rs 100 across our equity and fixed income fund. But as you correctly mentioned, it is a loss-making proposition for us. It is loss-making at two levels. One, typically people who are starting Rs 100, Rs 200, Rs 250 SIP are first-time investors into mutual funds and where we have to do KYC.

Harsha Upadhyaya, CIO-Equity, Kotak AMC, says “from a medium- to long-term perspective, we still continue to be quite positive on India from both earnings perspective as well as how markets are expected to behave. However, in the very short term given the kind of strong performance that we have seen and some reversal inflows as well as some red flags that I mentioned, probably markets would kind of show some weakness or consolidate at current level.” Upadhyaya also says that “although the earnings expectations are much higher in the midcap basket, I would say that most of that positiveness is also discounted in terms of valuations. I would say, if the markets go into a correction mode or into a decline, we will probably see more downside volatility on the midcap side rather than the largecap side.” Let us try and get your understanding of the current market movement. How is the market looking to you, talking about a few quarters down the line? Quite bullish from an undertone perspective I would say. However, for the past two months, we have seen some red flags emerging as well as foreign liquidity turning negative. For September and up until now in October, we have seen foreign institutional investors selling about $3 billion worth of Indian equities. We have also seen crude oil moving up beyond $90 per barrel level and monsoon which ended the season with the deficiencies of about 6% or so is also a red flag.

Nilesh Shah, MD, Kotak AMC, says “when smallcap starts trading at a premium to largecaps, when micro caps and mini caps start trading at the premium to largecaps, then there is a need to be a little bit cautious. Many of the micro caps and mini caps are today trading at valuation which looks excessive. They are trading there because floating stock is limited. There is a herd mentality in buying what moves and maybe distribution is already happening. There is no harm in being cautious when making money is easy.”I used to think that we are the only two bulls in the town. But when I look around, everybody suddenly is the India bull. Everybody is excited with what is happening in the midcap space, the smallcap space and the SME space. Now should one turn bearish for the sake of turning bearish or stay with the market?If you are a long-term investor, you can stay bullish. If you are a trader, especially in micro caps, mini caps and small caps, this is time to be cautious.

Kotak Mahindra Asset Management Company Limited today (December 3, 2021) announced the launch of India’s first-ever Nifty Alpha 50 ETF, Kotak Nifty Alpha 50 ETF.