Indian market is poised for gains in the long term and industries and businesses that will benefit from the ‘China + 1’ initiative, as well as the ‘Minus China’ movement, are the focus of Arun Chulani, Investment Advisor, First Water Capital Fund. In an interview with MintGenie, he talked about his view on the market.
Edited excerpts:
What is your view on the current market trajectory? For how long this rangebound move of the market may continue?
As a value investor, I think it is futile to try and predict the market’s short-term movements. It is far better to look at long-term themes and build conviction around a company’s intrinsic value.
Can the inflow of foreign flow sustain considering the strong gains in the dollar index and the rate hikes?
Again, to second guess what foreign investors might do and whether they will pull out their funds is of course important but while we may give credence to it, we prefer to focus on value. Of course, Uncle Sam wants some of his money back and conventional thinking might suggest that higher rates will allow some investors to better price risk and re-allocate to “perceived” more risk-free assets, which in turn might lead to outflows.
Are you positive about the domestic theme? What pockets are you bullish on?
Yes, most definitely. We are very hopeful that this is India’s decade. Much has been written about it in the press and there are multiple pockets that we would like to focus on. We are keen on industries and businesses that will benefit from the ‘China + 1’ initiative as well as the ‘Minus China’ movement. The latter are industries in which China itself is reducing its capacity – areas such as steel, chemicals, etc., as it looks to both reduce its pollution and upscale the products it focuses on. We are also keen on flexible packaging which is a relatively cheap proxy for the much fan-fared FMCG sector.
Can the mid and smallcaps outperform benchmarks? Please explain your views.
We very much focus on the mid-caps, and we believe that it is here that one can find value and companies that can create alpha. Of course on the flip side, you have to sometimes deal with opaque information and illiquidity. But with some luck and effort, one occasionally finds a diamond in the rough.
Is there more steam left in the auto stocks? What are the major challenges that the sector is still facing?
Autos are certainly an exciting space to be in, but I find them generally pricey. There is good scope for the sector but of course, there will always be risks due to high fuel prices, high input prices, and improvements in public sector transportation amongst other things.
The number of Demat accounts crossing 10 crores is a proud landmark. What factors have facilitated the rise of retail investors? Because of this, do you think the clout of FII will decrease in the Indian market?
We hope that this increase is due to a combination of factors. Ease of access, digitization, lower broker fees, and general education of making your money work. The market is one of the places where anyone with excess capital can invest and not only become an owner of some of India’s best companies but also benefit from India’s hopeful wealth creation. Of course, as the domestic investor becomes more disciplined and the GDP per capita grows, it will be more attractive for the FII.
The views expressed are the authors own. Please consult your financial advisor before making any investment decisions.
