Invest For The Long Term And Have Reasonable Expectations Of Returns: Hiren Ved, Alchemy Capital Management
With the NIFTY soaring past the 13,000 marks for the first time, what’s your broad take on equities? Is this the time to be cautious and book profits, or vice versa?
The markets have made a smart comeback on the basis of easy domestic and global liquidity, rapid recovery in economic activity post the pandemic and lockdown, better than expected Q2 earnings from corporate India, and long term structural reforms enacted by the government. So there is a solid basis for the markets to be where they are. Markets are forward-looking and there is no need to fear the current levels to book any profits. One should let one’s investment ride the recovery and stay invested for the long term. I would think of taking money out of this market only if I were leveraged. If not, equities remain a good place to be in.
Are you concerned about P/E multiples going well past all-time highs over the past couple of months? Is this a liquidity fuelled relief rally, or is it backed by fundamentals in your view?
As I mentioned above, there is a solid basis for the markets to have recovered. I would add one more point – the vaccine is now a reality. Yes, the P/E ratio seems high, but by other parameters like a market cap to GDP and cyclically adjusted profits/GDP, we are in a fair zone. We are not overpriced in the traditional sense of valuations because we are coming out of a unique health crisis and the amount of stimulus does have a bearing on what multiples the markets can trade at. However, we have to be mindful of near-term risks if the government’s around the world decide to introduce a re-lock down of the economy in any significant manner. Else we are in good shape in the markets.
What sectors are you particularly bullish on for the time being, and why?
I am bullish on all sectors but particularly on Pharma and IT Services on the export front and Auto’s/auto ancillary and select private financials, especially housing finance and real estate. Amongst new emerging sectors we are bullish on specialty chemicals and electronic manufacturing companies. In pharma and IT, we have long term structural tailwinds because of supply chain diversification in pharmaceuticals and drug intermediates by global customers and in IT due to the adoption of cloud and other digital technology adoption. Domestically, Autos are coming out of a three-year slumber, and housing and housing and real estate are reviving on the back of record-low interest rates and improvement in affordability.
The past few years have belonged to growth strategists… are you of the view that value is now ripe for a comeback for the next 2-3 years?
Growth with quality will remain a sustainable theme but that does not mean that value can’t comes back. But value has not delivered for over a decade. But that can change. You never say never in markets. Anything can happen.
Lastly, what would be your advice to the first time, retail investors at this peculiar juncture?
Don’t trade. Invest for the long term and have reasonable expectations of returns. 2-2.5X of 10-year bond yields is a good long-term sustainable return.
