Equity investments are a good tool for long-term capital appreciation, says Devender Singhal of KMAMC
MintGenie, Singhal said that equity investments are always accompanied by higher risks and related volatility. A Special Opportunities Fund is no exception.The market is currently at valuation multiples which may not be called attractive, more so, for mid caps and small caps where the valuation premiums are above long-term averages. We don’t see a case for multiple expansions over the next couple of years (especially for mid caps and small caps).
In this scenario, Alpha generation would come along with unique opportunities where you may see a case for both earnings growth accelerating and the scope of valuation multiples expanding. This fund seeks to invest in these very special opportunities. So, yes, we do think that this is the right time for such a fund.
Special opportunities can come in any form.
It can be by way of (a) policy changes in India and abroad, (b) mergers and acquisitions, (c) demergers, (d) management change, etc. There are further opportunities to look at operating leverage turning into financial leverage, industry consolidation, buyback, etc. So, the canvas is pretty wide to look across the market for such opportunities.Equity investment is always accompanied by higher risk and related volatility.
This fund is no different in that case. However, when you are focusing on bottom-up stock picking, you look at a disproportionate risk-reward scenario loaded in your favour.
Thematic funds generally have a much focused approach towards a particular sector or theme. These are hence used as a flavour to the overall equity exposure when an investor wants to play a specific theme more than any other.
