PMS Bazaar recently conducted an Exclusive Interview with Mr.Madanagopal Ramu, Head – Equity & Fund Manager of PMS Bazaar. This Interview is a Part of our Special Interview series, which will offer valuable insights from leading industry experts. In this Blog, we have extracted some key insights from the exclusive session for you to gain quality investment insights.

Excerpts from the interview:

Pressure on Nifty: Downtrend Analysis

Based on my understanding, you are asking about the reason behind the current downtrend and the effect of inflation, interest rates, and Nifty. I think a lot of time is spent discussing these topics, but the primary concern should be whether inflation will remain high for the next two to three years. The inflation rate was high last year due to a supply-side shock caused by the pandemic. However, most supply-side issues have been addressed, and we see a fall in commodity prices. The US and China's recovery are also not reflecting any significant increase in commodity prices. Still, shelter prices are high, keeping inflation sticky. However, the labor market is still strong, and shelter prices can decrease in the next two to three months.

If we take a two to three-year view, inflation will likely be normal. Hence, investors should focus on buying stocks with a long-term view, considering the market's current valuations. The Nifty is currently at a reasonable valuation, trading at around 18 to 20 times, and it is likely to remain at a consolidation phase or minor drift in the next six months. Assuming the Nifty's earnings to be around 1,000 to 1,050, the market could trade between 18 to 20 times, resulting in a forward index of 19,500 to 20,000 levels. The downside risk of the Nifty is protected at around 16,500 levels, and a maximum correction of 5% is expected.

However, one should note that portfolios with a 25 to 30 percent overlap with the Nifty may not follow the index. Hence, it is essential to look at different sets of stocks depending on their growth potential and current valuations. In conclusion, investors should focus on long-term investments and avoid being swayed by short-term market movements.

Investing in Growth Companies Beyond the Benchmark

India has added a $3.5 trillion economy since independence and is expected to add another $3.5 trillion over the next eight years. However, this new India will be different from what has been built. Two areas where considerable change is expected are consumption and investment. In the consumption basket, consumer discretion is expected to grow, which has happened in every country after reaching a certain level of per capita income. According to Mr. Ramu, “From a growth perspective, consumer discretionary will likely beat FMCG companies and the auto sector. There is hardly any other consumer discretionary stock to play in the Nifty, but it is a fast-growing space, so investors need to look beyond the Nifty. In the Pharma sector, growth has been struggling for many years, and even today, we don't see any consolidation happening in this space. Therefore, there are no restrictions on investing in the Pharma sector, and investors should consider sectors like specialty chemicals, which are not in the Nifty but are in the mid-term small-cap space.” Any commodity companies or utility companies' growth has been very poor over the last few years. During the COVID-19 period, due to supply shocks, metals did well, but from here, there is no great push for the metal inflation index unless China surprises us.

Therefore, metals are not a space for long-term investors. Investors should be tactical and get in and out at the right time. In the power sector and telecom, there have been short-term benefits due to consolidation, but otherwise, there is not much growth expected. The internet space is also not expected to grow beyond single digits. Investors need to look for growth companies beyond the Nifty but keep an eye on corporate governance and balance sheet quality. Many mid and small-cap sectors are not growing, so investors need to be selective.

The banking sector may have short-term pain due to the liquidity being taken out and interest rates rising sharply. It should not be a cause for long-term concern. Market corrections are an opportunity, and while there may be issues with risk management in certain financial institutions, central bankers have many tools at their disposal to handle any potential crisis. However, the global market's struggle with growth may have a more significant impact on India's export story, especially in the IT sector, which may grow at a slower rate and may not meet the criteria for investment. Overall, while there may be some short-term challenges, India's banking sector should not be a cause for alarm in the long run.

Qualities to Possess as an Aspiring Fund Manager

As an aspiring fund manager, there are several qualities that you should strive to possess, but here are three important ones:

• Strong analytical skills: An effective fund manager requires a deep understanding of financial markets, securities, and economics. You need to be able to analyze data, research companies, and interpret market trends to make informed investment decisions.
• Good communication skills: As a fund manager, you must communicate investment strategies, performance updates, and other important information to clients, stakeholders, and team members. Strong communication skills are essential for building relationships and trust with investors.
• Discipline and patience: Successful fund managers have a disciplined and patient approach to investing. They understand that investing is a long-term game and don't get swayed by short-term market fluctuations. They stick to their investment strategy and remain focused on their long-term goals, even during challenging times.

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

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