This top Indian money manager feels equities still not expensive
ETMarkets.com|
Updated: Oct 11, 2017, 08.32 PM IST
NEW DELHI: At the beginning of this year, ED & CIO at HDFC Mutual Fund, Prashant Jain, had a message for investors: If you target a double digit returns, equities are probably the only meaningful options. Ten months have gone and equities pretty much look the only place to earn a double digit return.
That said, with earnings failing to catch up with record high market levels in recent months, there has been a general concern in the market that valuations are no more reasonable.
But for Jain, this is an opportunity.
Returns come if you buy a business which is trading much below its intrinsic values and that typically happens only when there are some challenges either in the environment or in the business, Jain said on the sidelines of Morningstar Investment Conference 2017.
"We have faced some challenges and things are likely to improve going forward. The economy is really well-placed. I am not overly-bullish, but I am unable to place too many risks to the local economy. If something happens on geopolitical front, the markets can always correct. But as far as the economy is concerned, the profit growth is concerned, I would be quiet optimistic," Jain said.
The BSE Sensex has jumped 19.5 per cent so far this calendar at a time fixed deposit rates have been falling to sub-7 per cent level.
Jain noted that the domestic market, as suggested by benchmark Sensex and Nifty, have offered a modest 5-6 per cent return compounded annually, and still "there is this notion that the market is expensive."
I somehow feel quite differently, Jain said, adding that Indian economy has grown in double digits in nominal GDP terms and the market cap to GDP is at very attractive levels that is point number one.
"I have a value bias and value is available only when a sector is passing through some pain point. If you were early in the cycle the rewards have come a bit late, but they have been fabulous. If you bought capital goods, banks, metals in 2000s, they have gone up 20-30 times. If you bought oil companies when they were burdened with the subsidies, they have gone up 5-10 times and who has bought them in last few years you made little money," Jain said.
That said, with earnings failing to catch up with record high market levels in recent months, there has been a general concern in the market that valuations are no more reasonable.
But for Jain, this is an opportunity.
Returns come if you buy a business which is trading much below its intrinsic values and that typically happens only when there are some challenges either in the environment or in the business, Jain said on the sidelines of Morningstar Investment Conference 2017.
"We have faced some challenges and things are likely to improve going forward. The economy is really well-placed. I am not overly-bullish, but I am unable to place too many risks to the local economy. If something happens on geopolitical front, the markets can always correct. But as far as the economy is concerned, the profit growth is concerned, I would be quiet optimistic," Jain said.
The BSE Sensex has jumped 19.5 per cent so far this calendar at a time fixed deposit rates have been falling to sub-7 per cent level.
Jain noted that the domestic market, as suggested by benchmark Sensex and Nifty, have offered a modest 5-6 per cent return compounded annually, and still "there is this notion that the market is expensive."
I somehow feel quite differently, Jain said, adding that Indian economy has grown in double digits in nominal GDP terms and the market cap to GDP is at very attractive levels that is point number one.
"I have a value bias and value is available only when a sector is passing through some pain point. If you were early in the cycle the rewards have come a bit late, but they have been fabulous. If you bought capital goods, banks, metals in 2000s, they have gone up 20-30 times. If you bought oil companies when they were burdened with the subsidies, they have gone up 5-10 times and who has bought them in last few years you made little money," Jain said.
