In an interview with ETMarkets, Bansal mentioned: “From a sentiment perspective, India stays a popular long-term story, as there usually are not many giant economies globally that may provide progress charges of round 7% for the subsequent decade or so” Edited excerpts:
Samvat 2080 completed robust; nonetheless, there was some volatility within the final month. How do you see the market till the subsequent Diwali, 2025?Sandip Bansal: Certainly, the final 12 months was good for the markets. The broader indices delivered returns of about 30%, with giant caps being barely decrease, and mid-caps and small caps performing significantly better. The final month or so has been risky.
Whereas we’ve been lulled into believing that markets shouldn’t be risky—based mostly on the expertise of the previous couple of years—volatility is an inherent attribute of the markets. That mentioned, the volatility was concentrated in October, with broader indices down by round 7% or so.
There are at all times causes for volatility, and this time it could possibly be attributed to an underwhelming earnings season, FII outflows, a very good run-up over the previous couple of years, uncertainty across the US elections, and so forth.Wanting on the outlook for the subsequent 12 months, from a elementary perspective, we imagine that Indian markets will ship earnings progress of round mid-teens. We’ve got seen a revival in rural demand following good monsoons, and that’s anticipated to proceed.In the previous couple of months, there was a slowdown in authorities expenditure, each on the income aspect and particularly on the capital expenditure aspect, because of elections, heatwaves, monsoons, after which the festive season; we anticipate a pickup in that.We’ve got seen loads of capital elevating within the markets by corporates, and capability utilization ranges are additionally reaching threshold ranges, which suggests the non-public sector capex cycle ought to kick in.
So, the setup appears to be like optimistic from a elementary perspective. From a flows perspective, home flows into equities as an asset class proceed to be sturdy.
Via the approaching 12 months, we must always see a discount in rates of interest, each globally and, to a lesser extent, in India, which is once more optimistic for danger belongings.
From a sentiment perspective, India stays a popular long-term story, as there usually are not many giant economies globally that may provide progress charges of round 7% for the subsequent decade or so.
How has the efficiency of the Lighthouse PMS product been during the last 12 months?Sandip Bansal: The Lighthouse PMS was launched in March of this 12 months, so it has a efficiency observe file of about eight months. Thankfully, the returns have been good, with numbers round near 19.5% or so. It has managed to outperform its benchmark, the BSE 500 TRI, by about 8%.
Your portfolio is tilted in direction of engineering in addition to metals and mining. What makes you so optimistic about these sectors?Sandip Bansal: The Lighthouse technique is a centered strategy through which we spend money on a number of chosen themes at a given cut-off date. The present themes for the fund are manufacturing, infrastructure, power, and protection.
We imagine these themes are present process large structural transformations and current very deep and huge alternatives. The runway for worth creation, in our view, may be very lengthy, and we wish to stay invested in these themes for the subsequent few years a minimum of.
So far as manufacturing is anxious, there are a number of drivers supporting India’s story, together with import substitution, authorities initiatives, world diversification of provide chains, and a really giant home market. We imagine we’re on the early phases of a significant manufacturing revival within the nation.
For infrastructure, post-pandemic, the federal government has stepped up investments throughout all the infrastructure area, and we anticipate such investments to proceed.
We additionally anticipate the non-public sector capex cycle, as beforehand mentioned, to kickstart. This makes us very optimistic on the infrastructure area, which can also be supported by the manufacturing story, as manufacturing requires vital motion of products, and many others.
In protection, we’ve seen a giant push for indigenization. There may be additionally an export story creating in protection. India has elevated its expenditure in that area, particularly given the present geopolitical panorama.
Current conflicts have additionally proven that world provide chains might be disrupted throughout such occasions, which reinforces protection as a structural story for us.
FPIs have grabbed the eye of market members in October after a heavy selloff. The FPI promote determine of Rs 1,13,858 crores by the exchanges in October is the only highest absolute promoting ever in a month by FPIs. How do you see the development?Sandip Bansal: Sure, certainly, FII promoting within the final month has been fairly heavy. This needs to be considered within the context of the general market dimension, which has grown significantly through the years.
Whereas FII promoting has been substantial, our market dimension has additionally expanded. The explanations attributed to FII promoting embrace an increase in US yields by round 60 bps during the last couple of months, with the greenback (DXY) strengthening by over 3%.
There may be additionally uncertainty across the US elections. Moreover, we’ve had a comparatively muted earnings season within the context of comparatively excessive valuations each domestically and globally.
On the similar time, China has undertaken stimulus measures to revive its financial system, and within the world context, Chinese language markets are extra cheaply valued, resulting in some reallocation in direction of China. These are the broad causes behind the FII promoting.
Nonetheless, over time—particularly lately—home flows have greater than compensated for FII outflows, making the Indian markets extra resilient. In actual fact, in October, the DII holding proportion of the general market might need surpassed the FII holding for the primary time this millennium.
That mentioned, we imagine that equities are a progress asset, and all buyers need to take part in robust, long-term progress alternatives, the place India stands out globally. Whereas intermediate volatility because of allocations or particular information occasions is feasible, the long-term development stays in India’s favor.Why is it important to give attention to high quality investments throughout risky occasions?Sandip Bansal: I imagine you will need to give attention to high quality investments always as a result of we have no idea when markets would possibly turn out to be risky. High quality investments assist an investor maintain their positions throughout market volatility.
In risky occasions, most inventory costs appropriate, however high quality shares are likely to appropriate much less. As a result of inherent strengths of those companies, an investor is ready to maintain on to them and keep away from one of many worst errors in investing, which is promoting a very good enterprise throughout a nasty time. That’s the reason we imagine high quality investing really helps.
What qualities ought to buyers search for in corporations in periods of excessive market volatility?Sandip Bansal: It’s not particular to risky occasions, as we typically see inventory costs appropriate throughout such intervals. The inventory worth is what an investor pays, whereas the worth of the enterprise is what they obtain, and this worth doesn’t change with inventory worth volatility.
The worth of a enterprise is definitely a perform of its earnings, earnings progress, the capital effectivity with which these earnings are generated, and the knowledge, predictability, and sturdiness of these earnings.
Though there is likely to be an intermediate emotional loss throughout risky occasions, this doesn’t impression worth creation. That mentioned, the emotional ache created throughout volatility can typically power an investor to promote, and as we mentioned, promoting a very good enterprise at a nasty time will not be excellent.
Some qualities to search for in a enterprise embrace excessive returns on capital, robust administration, aggressive moats, and a sturdy, largely debt-free stability sheet.
Typically, such companies are leaders with comparatively sturdy, predictable earnings and excessive free money flows, which profit buyers over the long run, particularly throughout risky occasions.What’s the present valuation of the general market, and the way does it evaluate to historic ranges?Sandip Bansal: The EPS for Nifty, one-year ahead EPS, could be within the ballpark of round 1175, and presently, we’re buying and selling at round 20.5 occasions one-year ahead based mostly on that.
The 20-year common for Nifty is round 18 occasions, so at 20.5, we’re buying and selling at a couple of 14% premium to the 20-year common Nifty multiples.
The 15-year common for Nifty is extra like 19 occasions, so in comparison with that, we’re buying and selling at a couple of 9% premium. If we have a look at the final 10-year common, Nifty multiples have been round 20.5 occasions, so we’re presently buying and selling at concerning the common multiples of the final 10 years.
When these numbers, we also needs to take into account that the long-term story for India as we speak is probably stronger than the averages during the last 10 to twenty years.
Sentiment across the nation is healthier, the reform momentum is at the next degree, and world and home liquidity can also be supportive.
Are we seeing indicators of overvaluation or undervaluation in particular sectors?Sandip Bansal: Sure, I’d fully agree with you on that. There may be at all times a case of undervaluation and overvaluation in particular sectors inside markets.
This may be considered from two views: one is relative to the sector’s personal buying and selling historical past, and the opposite is relative to the sector’s progress outlook and progress potential over the foreseeable future.
its personal buying and selling historical past, one might argue that the IT sector is overvalued. From a progress outlook and potential perspective, we imagine the patron staples sector may not be capable to ship very excessive progress charges, and thus, in our view, that sector additionally seems overvalued.
Relating to undervaluation, based mostly by itself buying and selling historical past, one might argue that the banking sector is buying and selling at comparatively undervalued ranges.
What function will world financial circumstances play in influencing the home market?Sandip Bansal: International financial circumstances play a vital function in home markets. We imagine that many of the bigger dangers to Indian markets originate exterior India.
Decrease financial progress globally can impression India’s exports, as the worldwide market is much bigger than the home market, and low-income international locations require a robust export market to maintain excessive GDP progress ranges.
Throughout occasions of slower financial progress within the US, for instance, companies might lower down on tech spending, impacting progress within the IT companies sector. Equally, if Chinese language progress slows down, corporations there might promote items globally at discounted charges, affecting the profitability of Indian corporates.
Geopolitics additionally performs a essential function, as it may well weaken world progress, enhance logistics and provide chain prices, and create uncertainty, which hampers funding by clouding the financial progress outlook.
Whereas India stays a robust home demand-driven financial system, a good world financial atmosphere remains to be important for sustaining progress charges.
Which sectors are presently thought-about “dawn sectors,” and what makes them interesting to buyers? Are there particular tendencies or improvements inside these sectors driving their progress potential?Sandip Bansal: From a listed markets perspective, the power transition theme and the e-commerce theme are thought-about a part of the dawn area in India.
The power transition encompasses a variety of sectors, together with electrical autos and the renewables ecosystem.
These sectors are pushed by a robust authorities push, with a number of initiatives, equivalent to production-linked incentive schemes for inexperienced hydrogen, PLI schemes for photo voltaic PV manufacturing, the PM Kusum Subsidy Yojana, the PM Surya Ghar Yojana, and bold ethanol mixing targets.
This power transition development is world, and India’s decarbonization targets are additionally formidable, driving progress inside this theme.
When it comes to e-commerce, a number of companies are rising, from on-line procuring to different internet-first companies. Key tendencies driving progress on this sector embrace altering shopper habits and preferences, with customers more and more searching for comfort, items, meals, and companies from the consolation of their houses, avoiding journey, site visitors, and metropolis congestion.
Demand for fast deliveries and instantaneous gratification is excessive, particularly amongst India’s younger demographic, and we’ve seen related tendencies play out in different giant world markets.
The place are the large funding tendencies rising if somebody plans to take a position for 5-10 years?Sandip Bansal: We’re very optimistic concerning the manufacturing sector within the nation. Manufacturing is clearly a big sector, and presently, India’s manufacturing contribution as a proportion of GDP is round 15%.
The federal government goals to extend this to round 25%. So, if our GDP doubles over a sure interval, the manufacturing sector might doubtlessly triple throughout that point if these targets are met. Traditionally, most low-income international locations that transition to middle-income standing have very giant manufacturing sectors.
In India’s case, this progress is additional supported by import substitution, a big home market, and the worldwide diversification of provide chains. There are quite a few sectors, from protection to plastics, the place we nonetheless import many items, so the potential on this area is substantial. We imagine it’s a multi-decade progress story.
(Disclaimer: Suggestions, ideas, views, and opinions given by consultants are their very own. These don’t characterize the views of the Financial Instances)
