The biggest plunge for Indian equities in March since the 2008 crisis is an excellent time to buy good quality companies trading at low valuations and exit laggards, according to Samit Vartak.
“This is an opportunity of a lifetime,” the founder and chief investment officer of SageOne Investment said in an interview with BloombergQuint. “Identify businesses which are trading at half or a third of their fair valuation.”
According to him, an investor has to worry about two things: the valuation and what will happen to businesses over the longer run. “Better to focus on investments where you see businesses coming back and where valuations might come back to fair value,” he said, adding cinemas, specialty chemicals, contract manufacturing and airlines will definitely come back. Telecom ancillary space may see a huge jump, he said. “But better to be late in identifying such trends then be too early and take an impulsive decision.”
There might be businesses, Vartak said, that could get out of the good quality basket in a matter of three weeks. So, he advises to focus on identifying four to five leaders in respective sectors with strong businesses but trading below their fair value.
“The difference between these leaders and the second player is very high. So even if the economy grows by 3-4 percent, growth for these players might be more than 25 percent and they can double the earnings in the next three years,” he said.
Vartak sees the current crisis stemming from Covid-19 pandemic to be different than 2008. “While the U.S. Fed took a lot of time to react in 2008, this time they have been extremely quick to react,” he said. The U.S. has an unlimited balance sheet and that is what investors have to consider, he said, adding that the reaction of governments is going to be very strong. “I am sure of that for the western world but not for India.”
Watch the full conversation here:
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