“It is high time for India to get its due recognition among the global investor community, especially when it has the strongest outlook for growth among major economies, a stable currency, and a strong government and fiscal balance sheet, unlike many other EMs,” said Sheetal Malpani, Chief Investment Officer and Head of Equity at Tamohara Investment Advisors.
Edited excerpts from an interview with ETMarkets:
Although markets have hit record highs, India has still underperformed its EM and DM peers on a year-to-date (YTD) basis. Do you see scope for a trend reversal?
India has covered a lot of underperformances versus the US market in the past 3 months. Indian markets fell far less than developed markets and other EMs in 2022, so we have to look at 2023 YTD returns in that context.
Overall, since the start of the interest rate hike cycle by the Fed, India has been among the best-performing large markets and this should continue in my view.
FPIs have been on a buying spree in India. Do you see this sustaining and what are the factors that will drive it?
India is the most sought-after market for FPIs as of now given strong earnings visibility and the right policy direction at the center. Emerging markets (EM) like China which are 30% weight in global EM indices have seen gross underperformance in the last decade despite great economic growth, due to unfavorable regulatory and policy environments.
This has catapulted some of those flows towards India and this is a trend we believe will only get stronger going forward.
India gets roughly 1.3% to 1.5% of global equities allocation despite being 3% of the world’s GDP.
It is high time for India to get its due recognition among the global investor community, especially when it has the strongest outlook for growth among major economies, a stable currency, and a strong government and fiscal balance sheet, unlike many other EMs.
What’s the total AUM of Tamohara, and could you help us with the performance of two of your funds – Tamohara India Opportunities Strategy (TIOS) and Tamohara Truffle Flexicap Strategy (Truffle)?
We manage Rs 300 crore across our PMS and advisory book. As of June 30, the 1-year post fees TWRR for TIOS was 25.9% vs 21.6% for Nifty 50. For Truffle, the same stands at 27.96% vs 22.29% for BSE 500.
What’s Tamohara’s investment strategy and the mantra for generating alpha returns?
At Tamohara, we look for sectors that grow faster than India’s nominal GDP growth and within those sectors, buy companies that are gaining market share.
This combined with our proprietary Tamohara Checklist, which ensures an extremely high level of financial integrity and management integrity, allows us to buy businesses that are growing their real cash flows at better return ratios incrementally and not just companies that show growth in P&L- reported profits.
We, therefore, focus on operating cash flow growth and self-funded capex-driven plays.
The broader market has outperformed benchmarks by a wide margin. Do you see this outperformance continuing?
The sell-off in broader markets in 2022 was sharper than Nifty 50, thus on the way up they are performing better. In the last few months, incremental domestic flows are more skewed towards mid- and smallcap schemes.
This trend should continue and to that extent I believe that outperformance will hold, but the degree of outperformance will surely come down.
Which stocks/sectors are you bullish on and would look to bet on?
We are sector agnostic. Show us growth that is self-funded and sustainable, and we will allocate more there. Currently, pharma (CDMO, domestic pharma, and diagnostic), and auto ancillaries have large allocations in our portfolio.
Any major downside risks you foresee for Indian markets for the rest of 2023?
Nothing is on the horizon as far as the domestic economy is concerned. On the global front, further interest rate hikes in the US and Europe can lead to some volatility. Geopolitics will always remain the reason for some correction at any given point in time but that is not something we can predict or forecast.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)