Benchmark share indices have plunged from record high in a month. Given the covid-19 threat, how do you see room for correction? Do you think that the current valuations are attractive enough to steady the Sensex?
We have crossed the halfway mark in terms of market correction. In my opinion, there is still some steam left in the market for correction but most of it has already happened. Current PE earnings ratio of 12-13X also indicates this.
Sharp correction has also affected the already beaten down small-cap, mid-cap segment. How do you see the valuations for these segments?
Currently, valuations in small and mid-cap segments are attractive. But there are few things to keep in mind while selecting stocks in these categories. Invest in businesses that create wealth in the long run as those have the ability to generate high cash flows with a strong balance sheet. This is one of the common characteristics of the large wealth creators in the past couple of decades. Hence, we need to go beyond price-to-earnings multiple and select companies that have a resilient business model to tide over difficult times like the coronavirus pandemic.
What are your views on the large-cap companies’ ability to overcome this crisis faster than others?
Businesses with a strong balance sheet, high cash flows and low to no debt are the ones which have the highest chances of surviving and thriving. Such companies will eventually emerge stronger by acquiring weak companies and increasing market share.
Which sectors according to you have turned attractive after the sharp correction?
We continue to remain significantly positive on the consumer sector, both staple and discretionary segments due to its resilient model and long term growth prospects. Currently, we see value in banks and the automobile sector as both the sectors have witnessed sharp corrections. Also, we continue to favour information technology and pharmaceuticals due to their defensive nature.
UTI Equity Fund has outperformed the benchmark in the last 3-5 years. What has contributed to its performance? What is your accumulation strategy post the correction?
We have followed our core philosophy to buy great businesses and remain patient with them for about 3-5 years. Quality along with a growth model is our mantra for investing in companies. We will continue investing with this approach to provide higher returns to investors in long term.
Since the pandemic crisis has impacted our work routine, how are you engaging with your team considering the nationwide-lockdown situation? Which app do you use for video conferences?
We have been using ‘Microsoft Team’ to do video conference call and share screens with the team to display presentations, excel sheets and financial models.
How are you managing your time? Tell us more about your work from home routine.
The pandemic has made me realise the importance of time management. In the first few days of lockdown, it was easy to work from home and save time on travelling. But I would say working from home is not as productive as working from the office. In my view, we should utilize time judiciously to make work from home effective.
The pandemic crisis has severely impacted many businesses and each of our working styles. What are your two biggest lessons from this phase?
One important lesson I have learnt during this phase is to not take anything for granted in life. The famous adage, ‘Man proposes, god disposes’ now holds true for many of us now.
Another thing this phase has taught me is the power of human ingenuity as nobody thought about such a sudden change in lives a few weeks ago.
