Don't get scared when markets fall, it could be your chance to get in, says Mr Kela
Madhusudan Kela, chief investment strategist, Reliance Capital Asset Management Company believes that theories that Indian markets are by and large insulated from global volatility are completely untrue, at least in the short term.
"It may be true for the long term but in the short term none of this is true... from a medium to long term perspective I'll buy that argument but in the short term we are all correlated," Mr Kela told NDTV.
Markets have always reacted on global cues and news flows, at least in the short-term, he added. However, he maintains that India's inherent strength and fundamentals have helped it outperform the rest of the emerging markets.
"Even though because of our inherent strength and fundamentals we are outperforming whether it is currency or the markets and that is very visible over the last two years of turbulence, also we have seen many emerging markets have gone into shambles like Brazil for instance or like Russia. But we have relatively done far better."
Following are edited excerpts from the interview: (Watch the full interview)
Always Worried About Markets: I am always worried about the market whether short-term, medium-term or long-term. You have to always keep your eye on the ball. You can never be relaxed about the market.
The kind of global challenges which were thrown in, the kind of fluctuation and volatility which is there in the market, you have to be really far more attuned than what we are used to in handling the market.
Previously you would say this is the investment which I am making for the next 5 years, but these days even if you make a 5-year investment you have to keep reviewing it - if something has changed technologically in the business, if new competition has come, a new product has come - so all the time you got to be on your toes.
2008 jitters: When interest rates in the world are so low and so much liquidity is being pumped in to have that incremental and marginal growth and yet it is still not happening- that is a worrying sign.
I don't know when the clock will turn whether three months down the line or 6 months down the line - because now we are in an almost 35-year bull market in American bonds from 1982 till now. I think at some point of time that time and when that turns, it could be very ugly.
Worried about China: I too am worried because it's a large economy, is the driver for many sectors around the world. So we cannot take those developments very lightly.
Worried about growth: In a deflationary environment if you're missing growth that is a most scary thing.
Volatility biggest friend: This volatility is proving to be my biggest friend because volatility is when we get to invest. This is the point I want to drive to small investors. Don't get scared when the market falls...this is your chance to get into the market.
If the market was what it was in February-March at 9,000 Nifty you would have to get one year for you to get your money back. So when the market falls to 7,500 and if you're an investor who missed the market then that was your chance to get in. Only 3 out of 100 have caught the market, 97 are still waiting.
Metals and mining sector: Very difficult to take a call. If I had personal money I would start to look at that sector because stocks are getting too compelling. But you have to have a timeframe, the point is that it is possible for the next two years they don't move. There may not be downside but there may not be upside either.
But whenever the sentiment will become positive then you're not talking about 20 per cent return, then you're talking about 200 per cent return.
I am not averse to an idea of looking at it because today there is an extreme bearishness in the sector- but are we actively investing in the sector- no.
See most sustainable earnings growth in Pharma: With 66-67 to a dollar it is a far more stable business, still valuations have not gone through the roof, there are also small companies which are doing a great job so for next two years at least I have predictability in my mind, we'll review it after that.
Sectoral vs stock bets: Selectively you can say auto companies, private sector banks on a very selective basis, but we have to be very choosy. We have to be very choosy, you cannot generalise the sector as a whole.
PSU Banks: It looks like there is a lot of value, I don't know how long this current downturn is going to carry on so again we have started examining some investment bets on few PSU banks, but it is hardly half a per cent or one per cent of the portfolio, but we are looking at it.
"It may be true for the long term but in the short term none of this is true... from a medium to long term perspective I'll buy that argument but in the short term we are all correlated," Mr Kela told NDTV.
Markets have always reacted on global cues and news flows, at least in the short-term, he added. However, he maintains that India's inherent strength and fundamentals have helped it outperform the rest of the emerging markets.
"Even though because of our inherent strength and fundamentals we are outperforming whether it is currency or the markets and that is very visible over the last two years of turbulence, also we have seen many emerging markets have gone into shambles like Brazil for instance or like Russia. But we have relatively done far better."
Following are edited excerpts from the interview: (Watch the full interview)
Always Worried About Markets: I am always worried about the market whether short-term, medium-term or long-term. You have to always keep your eye on the ball. You can never be relaxed about the market.
The kind of global challenges which were thrown in, the kind of fluctuation and volatility which is there in the market, you have to be really far more attuned than what we are used to in handling the market.
Previously you would say this is the investment which I am making for the next 5 years, but these days even if you make a 5-year investment you have to keep reviewing it - if something has changed technologically in the business, if new competition has come, a new product has come - so all the time you got to be on your toes.
2008 jitters: When interest rates in the world are so low and so much liquidity is being pumped in to have that incremental and marginal growth and yet it is still not happening- that is a worrying sign.
I don't know when the clock will turn whether three months down the line or 6 months down the line - because now we are in an almost 35-year bull market in American bonds from 1982 till now. I think at some point of time that time and when that turns, it could be very ugly.
Worried about China: I too am worried because it's a large economy, is the driver for many sectors around the world. So we cannot take those developments very lightly.
Worried about growth: In a deflationary environment if you're missing growth that is a most scary thing.
Volatility biggest friend: This volatility is proving to be my biggest friend because volatility is when we get to invest. This is the point I want to drive to small investors. Don't get scared when the market falls...this is your chance to get into the market.
If the market was what it was in February-March at 9,000 Nifty you would have to get one year for you to get your money back. So when the market falls to 7,500 and if you're an investor who missed the market then that was your chance to get in. Only 3 out of 100 have caught the market, 97 are still waiting.
Metals and mining sector: Very difficult to take a call. If I had personal money I would start to look at that sector because stocks are getting too compelling. But you have to have a timeframe, the point is that it is possible for the next two years they don't move. There may not be downside but there may not be upside either.
But whenever the sentiment will become positive then you're not talking about 20 per cent return, then you're talking about 200 per cent return.
I am not averse to an idea of looking at it because today there is an extreme bearishness in the sector- but are we actively investing in the sector- no.
See most sustainable earnings growth in Pharma: With 66-67 to a dollar it is a far more stable business, still valuations have not gone through the roof, there are also small companies which are doing a great job so for next two years at least I have predictability in my mind, we'll review it after that.
Sectoral vs stock bets: Selectively you can say auto companies, private sector banks on a very selective basis, but we have to be very choosy. We have to be very choosy, you cannot generalise the sector as a whole.
PSU Banks: It looks like there is a lot of value, I don't know how long this current downturn is going to carry on so again we have started examining some investment bets on few PSU banks, but it is hardly half a per cent or one per cent of the portfolio, but we are looking at it.
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