Notwithstanding the valuation concerns in certain sections of the market, Motilal Oswal Asset Management is nearly fully invested in equities.
“Our current cash position for equity-oriented funds ranges from 1% to 3% across various products. This allocation reflects our confidence in the attractive valuations present in the market, with over 95% of our portfolios already invested,” said Akhil Chaturvedi, Chief Business Officer at Motilal Oswal MF.
While the recent stress test results are aimed at informing investors about potential risk factors within funds and assisting AMCs in managing liquidity risks, Chaturvedi does not anticipate a significant long-term impact on the performance of mid- and smallcap stocks. Edited excerpts from an interview with ETMarkets:
What’s the fate of mid- and small cap stocks after the recent stress test results released by AMCs?Akhil Chaturvedi: The recent stress test results released by AMCs brought some speculations regarding the impact on mid and smallcap stocks…These results are primarily data points aimed at informing investors about potential risk factors within funds and assisting asset management companies in managing liquidity risks. We do not anticipate a significant long-term impact on the performance of mid- and smallcap stocks.
There’s a lot of hullabaloo over whether valuations of smallcap and midcap stocks are stretched or not? Which side of the argument are you backing?
Akhil Chaturvedi: We are of the view that historical takeaways may not hold true for valuing small and midcap stocks.
When we see the category-wise valuations, large caps continue to be favourable. Mid- and smallcap valuations are higher than long period average.
However, in the past, mid- and smallcaps did not have a sustained period of strong earnings growth continuing for any substantial period of time given the disruptive nature of 2008-2021 period, which saw Lehman, Taper tantrums, bank loss recognition, ILFS and ultimately Covid crisis. So, we believe that they might have higher growth in the future.
Some of the big fund houses have seen an increase in the cash levels. What’s your current cash position?
Akhil Chaturvedi: Our current cash position for equity-oriented funds ranges from 1% to 3% across various products. This allocation reflects our confidence in the attractive valuations present in the market, with over 95% of our portfolios already invested.
Our strategy underscores a focused approach aimed at maximizing market opportunities for our investors.
Two fund houses recently increased the tenure for exit load in small and midcap funds. Could this become a trend in the industry?
Akhil Chaturvedi: We have extended the duration for exit loads on small- and midcap funds to better match investor holding periods with long-term investment goals.
While a one-year exit load tenure remains the industry standard, we do not anticipate a widespread trend of a further increase in tenure for exit loads beyond this duration.
How does FY25 look for India Inc from an earnings perspective and investment opportunity?
Akhil Chaturvedi: Looking ahead into FY25, India Inc’s earnings perspective and investment opportunities appear promising. Recent years have witnessed significant improvements in earnings growth, a trend we expect to continue in the coming years.
Factors such as ongoing reforms and the country’s strong economic fundamentals position India Inc for sustained exponential growth across key sectors.
Which are the domestic themes that you think aren’t still overdone and hold potential to do well in the near future?
Akhil Chaturvedi: Our analysis identifies key domestic themes that we believe offer untapped potential and are poised for strong performance in the near future.
These themes, derived from a comprehensive assessment of macroeconomic factors and current market conditions, include new-age technology, healthcare (specifically hospitals), diversification strategies like China+1, consumer spending, manufacturing, urbanisation-related opportunities, and the non-banking financial sector (NBFCs).
Despite the concerns surrounding the broader market, do you think India can outperform its EM peers in 2024 as well?
Akhil Chaturvedi: Despite broader market concerns, India’s robust GDP growth rate of 6.5%, compared to the EM average of 4.2%, suggests the potential for outperformance by Indian markets relative to its EM peers in 2024.
This favourable economic outlook, ongoing structural reforms, and sector-specific growth drivers position India favourably within the emerging markets landscape for 2024.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
