Financial services shares are likely to outperform in the near-to-medium term, feels Arindam Ghosh, CEO Mirae Asset. In a chat with ET, Mr Ghosh Financial services shares are likely to outperform in the near-to-medium term, feels Arindam Ghosh, CEO Mirae Asset. In a chat with ET, Mr Ghosh says that the risk-reward premium has narrowed down considerably, and that investors will have to hunt deeper to spot values. Excerpts:
The market has been grappling with the volatility arising from the debt crisis in Europe. The recent upswing apart, where do you see the market headed?
The Indian economy is chugging along well, with GDP growing at about 8% plus. The recent trend in monsoon, too, is satisfactory, although the overall picture would be clearer after a few weeks. The results from Q1 earnings are reasonably impressive so far and we are on track for a 17-18% growth year-on-year this quarter, which is actually one of the leanest quarters of the year.
It is a well-recognised fact that today, India offers a unique combination of strong demographics, rising incomes, low consumption and favourable government policies, factors that allow India to be among the preferred economies in terms of the potential to deliver high return on equity (RoE) to investors. Given these aspects, we remain positive on the market and are confident that the market will continue its upward stride albeit for a few hiccups resulting from any adverse news on the global front.
What would be your investment approach in the current market?
The risk-reward premium has narrowed compared with the past year’s lows, as the market has moved to the reasonably-priced zone. Concerns relating to the possibility of a double-dip recession in the developed world and hard-landing due to inflation may persist for some time. Having said that, there are many investment opportunities to hunt deep to spot values.
We continue to remain positive on the financial sector, which has the largest component of the index at about 25%. Financials, in our opinion, will be among the leading sectors for the market. Besides, we are positive on large-cap IT firms and, on a selective basis, on stocks in pharma and consumer segments.
Why are retail investors shying away from mutual funds? Do you feel it largely has to do with distribution issues, following the removal of entry load?
While the industry has faced challenges in the recent past, we believe that the changes will eventually benefit all stakeholders in the long term. Also, it won’t be prudent to assign reasons for relatively low inflows entirely to this factor since other headwinds — market levels, global news and sovereign debt concerns — have also played a part.
An important factor is that a sizeable number of investors have been waiting for a correction to invest, given the swift uptrend in the market recently. Amid all this, one should not forget that mutual fund as a product is the most cost-competitive, transparent and affordable tool for retail participation in equities in the Indian market. We are confident that in the long term, the inherent advantages of this product would ensure that retail investors in large numbers recognise this aspect and join the mutual fund bandwagon.
Where would you advise retail investors to invest — equity, debt or SIPs?
Investors need to have confidence in India’s growth prospects and thereby invest in equities since this asset class offers the best returns in the long term. For retail investors, we would advise them to invest in equities through the SIP mode, since this is an affordable and time-tested strategy. Also, investors need to judiciously plan their asset allocation to ensure that they have a well-diversified portfolio.
Source: http://economictimes.indiatimes.com/Opinion/Interviews/Opportunities-aplenty-but-dig-deep-for-value/articleshow/6216810.cms?curpg=1
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