On a High!

While money man­agers are cau­tious, they are con­fi­dent that the party will con­tinue on Dalal Street.

Business Today - - CONTENTS - By MA­HESH NAYAK

While money man­agers are cau­tious, they are con­fi­dent that the party will con­tinue on Dalal Street

On April 13, 2017, San­deep Nayak, Chief Ex­ec­u­tive and Ex­ec­u­tive Di­rec­tor at Cen­trum Broking, was wrap­ping up his work be­fore par­ty­ing with his team ahead of the long week­end. The rea­son: The firm's wealth man­age­ment arm had recorded the high­est ever sales for the month of March (2017), the first time since 2011, when the com­pany started the wealth man­age­ment busi­ness. To­day it man­ages as­sets over `10,000 crore.

“Thanks to the buoy­ancy in the eq­uity mar­ket, we have been able to amass high­est-ever as­sets un­der man­age­ment ( AUM) in a sin­gle month,” says Nayak, who real-

ises that in­vestors do not have any other av­enue to in­vest ex­cept in eq­ui­ties. With real es­tate and com­modi­ties go­ing through a slump, and post-tax re­turns of bank fixed de­posits be­ing around 5 per cent, play­ers are look­ing at the eq­uity mar­ket to give them a de­cent re­turn.

For Nayak, the irony is that the stock he sold (and booked prof­its) has surged fur­ther and none of them has cor­rected since he sold them. So the big question is: Where should one in­vest af­ter book­ing prof­its? Any qual­ity stock is costly and isn’t cor­rect­ing. And no one wants to sell.

Ev­ery­one agrees that the mar­ket to­day is not cheap. But strong liq­uid­ity, es­pe­cially from do­mes­tic play­ers, also means the mar­ket is not too wor­ried about profit book­ing. In fact, the play­ers are get­ting a suit­able op­por­tu­nity to ac­cu­mu­late in case of a cor­rec­tion. This is pre­cisely the rea­son that the mar­ket, post a brief cor­rec­tion af­ter hit­ting an all-time high, is back to the same lev­els within the span of a week. Says Nayak, “Cer­tainly, this mar­ket is not for fresh in­vest­ments. One should wait for the mar­ket to cor­rect be­fore en­ter­ing, but all eyes are now on the re­sults, more so on the fu­ture guid­ance by com­pa­nies and the mon­soon. If both meet mar­ket ex­pec­ta­tions, it will fur­ther boost the rally.”

Nayak is not the only one who is par­ty­ing. Pra­teek Agrawal, Chief In­vest­ment Officer ( CIO) and Head, Busi­ness, at ASK In­vest­ment Man­agers, has also planned to go out to lunch with his team on April 14. Af­ter all, the AUM crossed `10,500 crore in March 2017 com­pared to `6,500 crore in March 2016. The fund has also beat the in­dex by over 6 per cent. In just one year, the fund re­turned 25 per cent com­pared to the Nifty re­turns of 19 per cent. Also, in the third quar­ter ended De­cem­ber 2016, his port­fo­lio reg­is­tered an earn­ings per share ( EPS) of `17 com­pared to Nifty's `6.5.

“We have stuck to the con­sump­tion story and that has re­warded in­vestors. In fact, the de­mon­eti­sa­tion has been a bit bad for our port­fo­lio, which saw the Nifty surg­ing higher. But our track record of gen­er­at­ing more than the in­dex has seen us gar­ner­ing an av­er­age of over `200 crore a month for the past three years,” says Agrawal. Ac­cord­ing to him, the money is flow­ing into In­dian mu­tual funds, do­mes­tic in­sti­tu­tions and port­fo­lio man­age­ment ser­vices ( PMS) due to three rea­sons. First, al­ter­nate as­set classes are not de­liv­er­ing the said re­turns; sec­ond, house­hold sav­ings are in­creas­ing; and third, in­vestors are seek­ing the ser­vices of spe­cialised man­agers rather than in­vest­ing di­rectly into eq­ui­ties.

Agree­ing with Agrawal, S Kr­ish­naku­mar, CIO (Eq­uity) at Sun­daram Mu­tual Fund, who in­vests 80 to 90 per cent of his money in his own funds, says, “Our suc­cess in re­ceiv­ing flows from in­vestors is there be­cause ir­re­spec­tive of its re­turns, we have out­per­formed the in­dex. There are lag­gards and there are out­per­form­ers. We fo­cus on out­per­form­ers and those are grow­ing steadily, which is why we, too, are do­ing well.” Can one get good re­turns even at these lev­els? “It de­pends on where you are in­vest­ing; not ev­ery­thing is do­ing well,” says Agrawal of ASK. “Hav­ing said that, the do­mes­tic story is on a strong foot­ing and, there­fore, every cor­rec­tion should be taken as an op­por­tu­nity to en­ter the mar­ket. The March quar­ter re­sults are ex­pected to be bad when com­pared to the De­cem­ber quar­ter, par­tic­u­larly for com­pa­nies whose busi­nesses are purely driven by do­mes­tic con­sump­tion. But this may throw open an op­por­tu­nity to in­vest. Then again, glob­ally, the in­ter­est rates will be on the rise. So, the for­eign money flow into the mar­ket will re­main sub­dued and for­eign in­vestors may even sell off In­dia, thus play­ing a bal­anc­ing act be­tween the do­mes­tic and the over­seas flows and re­strict­ing mar­ket val­u­a­tion from stretched lev­els to get into eu­phoric lev­els.”

The only con­cern is that play­ers are mov­ing out of large caps and are get­ting into mid-cap, small-cap or even mi­cro-cap stocks, says Nayak of Cen­trum Broking. "With large caps, it is only val­u­a­tion risk, but with oth­ers, one can lose cap­i­tal by go­ing com­pletely wrong on the com­pany, busi­ness and man­age­ment. Hav­ing said that, if one gets the right pick, the re­wards are also higher for high risk." But then, with do­mes­tic flows be­ing strong and money man­agers be­ing cau­tious, this party doesn’t seem to be end­ing any time soon.

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