Long-term investors, go for gold, debt: Vijay Kuppa

“To stay longer in the game, one can diversify to other asset classes like gold and debt,” says Vijay Kuppa, CEO – InCred Money.

In an interview with ETMarkets, Kuppa said: “The valuations in the mid and small cap are not yet very cheap. One must be very selective and have a bottom-up approach while investing in this space” Edited excerpts:

What is causing some nervousness in the Indian equity markets?

The US yields hovering around 5% is a risk to riskier assets like equities. The Israel-Hamas conflict also has been weighing on the markets but to a lesser extent till now. Both Israel and Palestine don’t have a large impact on the global economy.

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But if the conflict escalates to neighbouring countries, then we can see a strong risk-off and impact on the markets. We have already seen some FII selling (Rs. ~45,000 Cr) in the last couple of months.

Stable SIP flows (which have crossed Rs. 16,000 monthly run-rate) are supporting Indian equities.

Growth momentum globally is seeing some slowdown. The US economy has been an outlier which is supported by heavy spending by the Government.

Other data points coming from the US economy point to a slowdown by the first half of 2024.

The next big question is – should one buy the fall or stay put?

The Indian story remains intact. An investor should take a long-term view and keep investing. If one has ongoing SIPs, then it is suggested to continue them.

In the medium term, it is a matter of time that inflation cools down. This will mean that interest rates globally may fall, which will bode well for financial markets in general.

The global slowdown can affect Indian markets also, but the long-term India story looks sanguine.

After the recent fall how should one play the small & midcap space?

The valuations in the midcaps and smallcaps are not yet very cheap. One must be very selective and have a bottom-up approach while investing in this space.

The major trends that are likely to play out strongly for India are in the Mid and small cap space and hence they still have the maximum potential.

FIIs are also increasing their stock coverage in this space, adding more depth to the markets. So, one should be cautiously optimistic while investing.

What does the management commentary suggest from the companies that have come out with September quarter results? If the geopolitical position escalates there could be further pressure on commodity prices?

There seems to be some stress in the rural economy with weak rainfall and lower reservoir levels, and high demand for MNREGA jobs. This is shown in weak volume growth in FMCG sector.

Consumer discretionary is also showing lower volume growth. Profitability has been strong on the back of softer commodity prices.

Geopolitical escalation can lead to higher commodity prices but that does not seem to be the base case as of now.

As we enter the new Samvat year, what were your key learnings from the year gone by?

One must have a diversified portfolio. Despite Nifty crossing the 20K mark this year, the returns in the last 2 years have been only 7-8% on an absolute basis.

There has been some amount of time correction and if this continues, the patience of investors can be tested, and they may end up taking sub-optimal decisions like redeeming their portfolio.

To stay longer in the game, one can diversify to other asset classes like gold and debt.

Which sectors are likely to hog the limelight till next Diwali?

A few exciting themes and the beneficiary sectors of these – Premiumization (Consumer discretionary), Increase in Government spending and Capex (Construction & Capital Goods), PLI and Make In India (Electronic Manufacturing Services).

Some other sectors that one should keep on their radar would be Insurance, Hospitals and Banking.

How are you looking at the recent crackdown by SEBI on fin influencers?

SEBI is looking to crack down on influencers who are spreading misinformation and inducing people with Get Rich quick schemes and strategies. Many novice investors have fallen in this trap and have lost their hard-earned money.

SEBI is looking to weed out such practices and rightly want to regulate Fin-influencers. Some influencers do well to educate investors and simplify investment options and those may not be significantly affected by the crackdown.

How should one spot gems in a falling market?

As mentioned earlier, one has to be bottom-up in stock selection. Prefer companies with good fundamentals – good growth runway, stable and improving margins, and strong cash flow generation.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

Harry Byrne

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