SIP flows have reduced for just about a month or two, during the last two months of the lockdown, but we cannot ignore that there have been genuine challenges on mobility.
SIP flows have reduced during the last two months of the lockdown. We cannot ignore that there have been genuine challenges on mobility, even for common people to access basic banking services, Sachin Shah, Fund Manager, Emkay Investment Managers Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) Stimulus package came and gone – the market seems to be unmoved by the same. Do you think, as and when India opens, the market is likely to see a rebound as the curious phenomenon of revenge shopping will surface in India as it was seen in China after the lockdown?
In our case, rural India is relatively unaffected and urban India getting back on its feet is a question of when daily activities would resume.
There will be a pent-up demand of nearly two months coming up in the first few weeks of opening. Interestingly, the demand for many products on consumer durables, personal mobility, telecom services may see increased interests as already observed in some of the recent surveys released by Google Search Engine.
Q) This could be a signal of something big. Equity inflows at 4-month low – as investors might have stopped SIPs or are afraid to invest now. What is your view, and do you think it will get worse?
A) SIP flows have reduced during the last two months of the lockdown. We cannot ignore that there have been genuine challenges on mobility, even for common people to access basic banking services.
And even today, a large section of the population is dependent on physical retail banking for their transactions, unlike the corporates, who have significantly shifted to digital banking.
From this perspective, it is still too early to say that it’s the ‘End of the SIP’ trend. The average ticket size of the monthly SIP contributors is quite minimal, hence, the base in terms of the number of SIP-based investors is quite granular for it to have a significant impact in just a few months, on the SIP trend that has got recognition over the last 3-5 years now.
Q) The big upgrade has happened in the telecom sector especially amid COVID-19. Can it turn out to be a wealth creator – which are the stock that you like?
A) In the entire episode of the COVID-19 pandemic, if there is one particular sector that has remained unaffected, it is the telecom sector.
In fact, with new trends like Work-From-Home & Digital Payments, the need for a 24* 7 digital connectivity and a high bandwidth (broadband) internet connection is becoming a near necessity across the population.
In the last few years, there has been major consolidation in the telecom sector with only three large players dominating the market share.
Also, most of the previous regulatory hurdles seem to be side-lined with some strong support from the government in the last few months. The top two players, Bharti Airtel & Reliance Jio have the largest market share (combined 70 percent+) in the country and strongest balance sheet to reap the benefits of higher spending of consumers over telecom services in the next few years.
Q) Any 2-3 stocks which are more or less unharmed by COVID-19 outbreak and why?
A) As mentioned previously, the Telecom sector is one of the privileged sectors, among the others that are relatively unaffected. As and when the economy is opened up, these sectors will be among the early ones to see demand for their products/services – FMCG, Pharma/Healthcare, Insurance (Life & Health) and IT Services.
It has been observed in the past, that some of the Asian regions, post the epidemic (similar to COVID-19), have experienced increased demand for Life & Health Insurance products. Similarly, people’s medical needs cannot be postponed beyond a limited timeframe.
The demand for IT services is also likely to get a major boost, as many corporates will focus more on building robust IT infrastructure and shifting their existing infrastructure on the cloud to provide seamless access to everyone &anywhere with all the security protocols in place.
Q) It could well be a once in a decade opportunity but how should one look at investing in mutual funds now especially at a time when there is a fear of life, and there is risk-off sentiment across the world? Should one become an aggressive investor or a balanced one?
A) It’s very important to maintain the right Asset Allocation, depending on the individuals’ risk profile. It is essential to relook, and if required rebalance one’s asset allocation in timely intervals for eg: after a recent 30 percent fall in Indian equities, the total weight (%) of equities in most of the portfolios would have significantly dropped from the allocated optimum levels, and by default, the Debt portion’s allocation in the current state would have inched higher.
From this perspective, it would be a good time to re-balance by adding to equities to get them to their optimum wt (%) in the portfolio.
Q) The government is planning to open the Aviation sector – but it will still take time for companies to sail high in open skies?
A) The current pandemic is going to create a paradigm shift in many of the consumer behaviours. At least, for some period, travelling will not be the top priority for many.
Currently, for most of the essential business travel, alternatives like video conferencing have gained leverage significantly and with the overall environment of cost-saving, it will probably be the new norm in the coming time. Also, for leisure travel, domestic travel by Road will be the most preferred mode in the near term.
Q) Earnings are unlikely to recover for the next 2 quarters – but any 2-3 companies which surprised you, and are unaffected by the COVID-19 outbreak or slowdown?
A) As mentioned above, companies in essential categories like FMCG, Pharma, Telecom are likely to be least affected by the COVID-19 outbreak or slowdown.
Q) It was a volatile week for Indian markets which started with a gap down, and then towards the close, we saw RBI MPC presser which led to a sharp downtick on Friday wiping out most of the gains. What was the reason why markets fell – is it banks or the negative growth rate which weighed on markets?
A) Markets are expected to remain jittery for some time, the uncertainty due to demand destruction expected from lower-income levels all around (salary cuts/job losses) is for real.
Till the time markets get clear visibility of a decent uptick in the GDP growth for FY22, it is unlikely for markets to have a strong movement in the near term.
Sachin Shah
Fund Manager, Emkay Investment Managers Ltd.
Sachin is a seasoned fund manager with over two decades of experience in the Indian equity markets. By virtue of his extensive research, Sachin realised early-on the need for a framework in which companies with evasively tricky standing needed to be filtered out very objectively, leading to the development of E-Qual Risk, EIML’s proprietary module which helps us to evaluate and compare listed companies on various aspects of governance. Sachin shares his knowledge and insights through various media interactions across print and digital platforms.
