ETMarkets Fund Manager Talk: Don’t bet on events like Budget as impact on markets reduced: Viraj Mehta, Equirus Wealth
“We don’t bet on an event like the Union Budget. Over the years, the impact of the Budget on markets has reduced, and the government is also conducting itself in a fiscally prudent manner,” Mehta, the Managing Director – PMS at Equirus Wealth, told ETMarkets in an interview. Edited excerpts:
How do you see 2023 panning out for Indian equities?
(Tax breaks, jobs or plan to beat China: What will Budget 2023 offer? Click to know)I expect domestic markets to largely follow earnings growth from current valuations and deliver close to double digit returns.
Among non-financials, operating margin has been impacted due to raw material inflation and other supply chain issues. But I see some recovery in margins for non- financials and healthy topline and bottomline growth for financials, which will enable double digit EPS growth for 2023 or FY24.
What are the major downside risks for Indian equities in 2023?
We believe certain export-oriented companies can see some sluggishness due to slower global growth. Having said that, this is a much debated matter now and is getting priced into the stocks of these companies.
Also, we have seen inflation impacting demand in certain lower ticket items. We need to continue to watch out for that.
Meanwhile, growth stocks that are factoring in 2025 earnings expectations or beyond, may continue to see some contraction in valuation multiples.
Which are the sectors you would be betting on in the run-up to the Union Budget and why?
We don’t bet on an event like the Union Budget. Over the years, the impact of the Budget on markets has reduced, and the government is also conducting itself in a fiscally prudent manner. However, there is some noise around tweaks on capital gains tax, which we need to watch out for.
The government is likely to miss its FY23 disinvestment target. Do you think we will see a lower target in the next Budget?
There is a possibility, but it won’t be meaningful enough to impact the fiscal deficit numbers given the buoyancy in tax collections.
What were your major bets in 2022 and which sectors do you see investment opportunities in this year?
We invested in 3 major themes in 2022 – real estate, consumer discretionary and snacking and auto ancillary. We are positive on these sectors and they will continue to perform in 2023 also. Infact, stocks of some auto ancillary names are interestingly priced.
What kind of asset allocation would you recommend an investor looking at putting Rs 10 lakh in the market today?
From a fundamental asset allocation point of view, one can consult his or her financial adviser to find out the equity versus fixed income allocation given the risk profile one has.
Within equities, largecaps delivered better in 2022. But I see more value in small and midcap space after their underperformance in 2022. However, in the smallcap universe, one should look at buying the right businesses at the right prices and focus less on the index.
Do you see fund flows within emerging
markets moving to China this year as that market has turned attractive from a valuation perspective? Would this mean, flows to India will slow down?
I believe India can also benefit from an increase in foreign fund flows into emerging markets, and gradually we are likely to see a larger weight for India within the EM basket.
Also, we do hear investors mentioning EM ex-China allocation as well in some instances.
2022 was again a good year for the IPO market. How do you expect 2023 to pan out?
There are several factors that are at play for the IPO market – buoyancy in the secondary market, good post-listing performance etc. So, it all depends on how all of this goes this year amid a volatile market scenario. However, I believe from a 3-5 years perspective, investors are very positive on the structural story of India.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)