Investment cycle, not quarterly earnings to drive volume growth going forward: Mayur Patel

economictimes.indiatimes.com:

Mayur Patel, Fund Manager, 360 ONE Asset, says “if somebody is willing to take a slightly long-term view, then the equity market outlook seems positive despite premium valuations. In the short term, the risk has gone up manifold in the small and midcap space and that is where we do see material downside in the short to medium term.”

After the last two-three very good years, now the market is giving some kind of reality check to the investors which were spoilt by very handsome returns, in largecaps, midcaps and smallcap. Now things are looking slightly shaky for a variety of factors. Are your conversations capturing all of that?
Mayur Patel: The equity market performance is never linear and predicting short-term performance is a futile exercise. So, instead we assess the risk-reward by evaluating the price-to-book valuation of the market vis-a-vis fundamental factors.

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The BSE Sensex is currently trading at around 3.7 times price-to-book, implying an 18% premium to its 20-year historic mean. So, there is a definite rise in risk. However, the favourable macroeconomic conditions such as strong growth, stable current account, resilient banking system and strong and stable fiscal regime which would become even clearer post elections provide a lot of comfort about long-term