PMS Bazaar conducted an Exclusive Interview with Mr. Atul Mehra, Fund Manager of Motilal Oswal. This Interview is a Part of our Special Interview series which offers valuable insights from leading industry experts. In this Blog, we have extracted some key insights from the exclusive interview for you to gain quality investment insights.

Excerpts from the interview:

Timing the Market

According to Mr. Atul Mehra, When considering whether it's a good time to enter the market, it's important to understand that timing the market is notoriously difficult. While trying to buy low and sell high may seem like a good idea, predicting market movements is nearly impossible. Hindsight bias can make it seem like there was an obvious "right time" to enter or exit the market, but this is often only apparent in retrospect.

For example, in 2001, there was a lot of panic in the market, and global markets were selling off. While it's easy to say now that this was a good time to enter the market, at the time, it would not have been easy to know what the right move was. Similarly, during the COVID-19 pandemic, the market sold off 40% in three weeks. While in hindsight, this may have been a great buying opportunity, at the time, there were a lot of questions about the future of humanity, and many people were understandably focused on more pressing concerns.

Rather than trying to time the market, focusing on long-term investment strategies based on your financial goals and risk tolerance is generally a better idea. Diversification and a disciplined approach to investing can help you weather market fluctuations and achieve your financial objectives over time. So, while it may be tempting to try to time the market, it's generally not advisable to do so.

Right Time to Invest in the Equity Market

When investing in Indian equities, there are several factors to consider. One important factor is the global backdrop and the market's current volatility. In general, it's a good idea to be cautious when investing in equities during market volatility, as sudden market shifts can cause significant losses. However, it's also important to remember that equities are long-term investments, and it's important to approach them as an allocation rather than a short-term gamble.

Equities are typically seen as a way to achieve higher returns than fixed-income investments, which generally offer lower returns but greater stability. For example, if you can achieve a 7-8% return on a fixed deposit, there is little reason to invest in equities unless you seek a higher return. However, equities come with higher risks, as sudden global or local events can cause the stock market to drop by 40-50%. This is why it's important to have a longer-term horizon when investing in equities.

The power of compounding is one of the key reasons equities are worth considering as an investment. Over the long term, compounding can generate significant returns that far outstrip those of fixed-income investments. For example, if you start investing at age 25 and retire at age 70, compounding your capital at a rate of 5% over 50 years will result in a 10x increase in your money. However, if you invest in an asset class that generates higher returns, such as equities, your returns will be even greater. For instance, at a 10% rate of return, you'll be up 100x in 50 years. At 15%, you'll be up 1000x, and at 20%, you'll be up 10,000x.

The key to investing in equities is to focus on the long term and take a disciplined approach. It's important to diversify your portfolio to manage risk and to focus on high-quality companies with a proven track record of performance. One notable example of a successful long-term investor is Warren Buffett, who has generated impressive returns over a 50-year horizon by focusing on high-quality companies with strong fundamentals. Taking a disciplined and patient approach to investing in equities can achieve significant long-term returns that can help you achieve your financial goals.

Business Opportunity (BOP) Portfolio

Bop is a portfolio product that aims to invest in high-quality businesses across different market sectors and capitalizations. Currently, the portfolio consists of around 20 to 23 stocks selected through a QGLP lens, which stands for Quality, Growth, Longevity, and Price. Each stock is chosen based on its potential to meet these four criteria, with a focus on delivering strong returns on equity and sustainable earnings growth over the next three years.

The portfolio is diversified across large, established businesses with strong franchises and mid/small-cap companies with the potential to become future multi-baggers. As a young fund with low AUM, Bop has the flexibility to allocate meaningfully across market caps and take advantage of investment opportunities that larger funds may miss.

In terms of recent performance, Bop has outperformed the market by around six to seven percent on a post-fee basis in the current financial year (FI23), despite challenging market conditions. The portfolio's current valuation reflects a price-to-earnings ratio of 16x for current-year expected earnings and 10x for clear-out expected earnings. Overall, Bop's construction is built on a solid foundation of the four pillars of QGLP, which should support the portfolio's continued success in delivering strong returns to investors.

In the interview, Mr. Atul Mehra discussed several other questions in detail. Watch the full interview with the link appended below - 

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