3/7/2020 People have always made money by allocating more to equities in such times: Manish Gunwani - The Economic

unwani - The Economic Times

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People have always made money by allocating more to

equities in such times: Manish Gunwani
BY ET NOW | MAR 06, 2020, 05.35 PM IST Post a Comment

You have seen cycles before, have you seen any as vicious as the one panning out
right now? We do not have any visibility where it is heading from here on.

These cycles look vicious but I think every two-three years, we are getting these kinds of
cycles; 2013 end, 2015 end, 2009. Time-wise, this has been a fairly long correction but not
so much price-wise. It sort of started in Jan 2018; it is almost two years now where we
have not seen the broader market do anything. But it is just a confluence of factors; first
global growth dived because of the trade tensions, then NBFC crisis then this virus, plus
today this bank thing. These are the times where on hindsight people have made a lot of
money by allocating more money to equities. Across large and midcap, save 10-15% of
the stocks, a lot of stocks are very cheap. The earnings base is very cheap, the economy,
It is time to move from strong secular companies
capacity utilisation in a lot of sectors like auto, retail, etc. is very low. There is a lot of which typically have been expensive to something
operating leverage in that sense. I prefer local, domestic economy focussed stocks versus with a good balance sheet but with a lot of operating
global because the virus thing is a bit of an unknown. Also, equities are a great asset leverage.

class to invest in right now. We probably need to stay away from financial leverage.
Overall, as a portfolio manager, it is a very good time to add operating leverage. Big Change:
The end of Five-Year Plans: All you need to know

Is it time to start deploying funds in SIP in an increased manner or is it time to be

slightly cautious in the market? Would you advise investing lump sum right now?
How should an investor who is actually in this game for the long haul approach the
market in such a scenario?

This is a brilliant time to increase allocation to equities. This is not a time to be defensive because even non-leveraged good cash flow
companies are available at very reasonable valuations. This is the time like 2013 or 2015-end where you move from whatever asset
class can give you some cash to increase your asset allocation to equities; whatever you can afford to do be it in lump sum or by
increasing SIP.

The flows are very healthy for the sector. How are flows to your schemes and where are you deploying those incremental
flows? Have you been a buyer in the last couple of sharp cuts?

Definitely. After the brand change, about three-four months back, we are seeing much more inflows into funds. From a portfolio
perspective, there are two things we are doing: One is that we are adding operating leverage. If there was a staples company which is
trading expensive, we are selling that and buying either industrial or a cement company or whatever gives you operating leverage. It is
time to move from strong secular companies which typically have been expensive to something with a good balance sheet but with a lot
of operating leverage. Some of the segments where we are playing are commercial vehicles, hotels, etc. We are also moving a bit away
from global companies to local companies because the Indian economy has a lot of strength at this point in time which the global
economy probably will not have. Auto is another sector where you can selectively pick as long as you are not in companies where
technology disruption is happening. Within auto, there are a fair amount of companies that will do well even if EV comes and many of
these stocks are cheap as well.

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