Equity markets have rebounded smartly since April leaning on foreign money, but does that mean investors can aggressively bet on stocks? Kashyap Javeri of Emkay Investment Managers doesn’t think so.

“Despite a rebound generally in equities, we don’t believe that the rising tide will raise all boats. The investments for 2023 will have to be selective and stock specific,” fund manager Javeri told ETMarkets in an interview.

Equities have rebounded sharply since April. Do you think stability is returning and so is investor confidence?
There have been few drivers of rebound in equities since April.

(1) The growth outlook for earnings for Q4FY23 improved vis-à-vis Q3FY24, driven by reducing pressure on raw material costs and sustained demand

(2) Improved outlook on interest rates brought back FPIs and FIIs to Indian equities and

(3) A great union budget with commitment continuing to capex and positive surprise on no large uptick in government borrowings

So, Improved outlook on earnings, and a more benign view on liquidity has fuelled the rally.

A section of people in the market believe that 2023 will be a year of accumulation as volatility is likely to be higher. Do you also think so?
Despite a rebound generally in equities, we don’t believe that the rising tide will raise all boats. The investments for 2023 will have to be selective and stock specific.

Post-COVID, rapid bounce in equity helped non-quality, high financial leverage or even deep cyclical companies to post robust returns, but we think that the party is over.

Money’s getting cheaper but not as cheap as the post COVID period.

From here on, the focus will be on companies’ ability to be resilient to any external shock and ability to take advantage of India’s structural demand rebound.

Which funds do you directly oversee and what is the total AUM?
I look at some of the smart alpha strategies at Emkay Investment Managers, where the approach is to invest in sectoral leaders, proven management and growth focussed companies through the process of eliminating value destroyers.

We also had a chance to launch a manufacturing-focussed strategy, Emkay New Vitalised India strategy (ENVI) which has done phenomenally well since inception.

The Capital Builder multicap fund has given more than 30% returns on a 3-year basis. What has led to this performance and what’s the strategy to select stocks?
While Emkay Capital Builder delivering >30% CAGR over the past 3 years is a matter of significant pride for us, I think the more important point is that we have been able to nearly quadruple (3.84x) our clients’ portfolio over a period of 10 years.

The secret sauce for our performance delivery is diligently following our processes of placing razor sharp focus on quality and discipline. We try to avoid concentration risk by adhering to individual stock and sector allocation %, both at the time of investing and cutting the tail due to extraordinary appreciation of that particular holding.

After the recent correction, valuations have turned attractive in the broader market segments. Which sectors would you like to invest in the midcap and smallcap categories?
The sectors that we are quite bullish on are automobile and related ancillaries, capital goods and CRAMs.

What’s your PMS’ view on the overall IT sector and given the headwinds to growth in FY24, what would your allocation strategy be?
Our allocation to the IT services segment got more emphasis post COVID given that we foresaw the investments that global corporations would have to do to combat inflation in labor markets (through more automation) and on digitalisation of business.

We also like some of the midcap companies in ER&D companies both in product as well as software business.