Nilesh Shah Has Advice For Investors In A Volatile Market
Turn back to quality businesses at reasonable valuations to protect capital. says Nilesh Shah.
"This is the time to save wickets rather than take risk to score runs."
That's how Nilesh Shah, managing director of Kotak Mahindra Asset Management Co., advises investors to be cautious during the current market volatility.
People should preserve capital and not try to be aggressive to make money, Shah told BQ Prime's Niraj Shah in an interview. He suggested investors should avoid leverage, calling it a "disaster in today's volatile market". He advised against being overweight on equity, and also avoid high-valuation stocks and firms with a limited floating stock.
What should investors do? Turn back to quality businesses at reasonable valuations, Shah said.
Key Themes
Shah sees banking and financial services as a pocket that can provide a longer runway. His optimism stems from improving margins, controlled bad loans, potential recovery and fair valuation.
He also predicted a steady growth of the domestic market because of the shift from the unorganised to the organised sector. Listed manufacturing firms will benefit from domestic market share gain and China-plus one exports, according to Shah. Occasional downturns, however, will have to be endured along the period of long-term growth, he said.
Shah is also cautious about Indian information technology stocks, citing valuations. More so because of pressure on the margins as wage costs and attrition hurt.
"Unless and until, profitable giants like Amazon, Apple, Microsoft, Flipkart re-rate themselves, it is unlikely that Indian IT companies will be able to sustain above their valuation for more than a year," he said. "However, even in the unlikely scenario of a U.S. recession, Indian IT companies will be pushed to incur productive expenditure efficiency in the slow economic growth scenario."
According to him, the IT sector's real challenge will be margin.
Watch the full interview here:
