Business Standard

Investors opting to sit back till

things get clearer: Kenneth
Andrade

The market sell-off has already captured a lot of bad news in the price.
Businesses now trade at book value (BV) or significantly lower, which limits
their downside.
Even though the markets have recovered from their recent lows in a hope that
the worst may have already played out as regards coronavirus (Covid-19)
pandemic, KENNETH ANDRADE, founder & chief investment officer (CIO) at Old
Bridge Capital Management tells Puneet Wadhwa that investors need to push
their investment horizon to 2022 and beyond to watch how corporates recover
from the lockdown. Edited excerpts:

Do you see more pain for the markets over the next three – six months once
the dent on corporate earnings and economy due to Covid-19 becomes
clearer?
The market sell-off has already captured a lot of bad news in the price.
Businesses now trade at book value (BV) or significantly lower, which limits
their downside. The risk-reward ratio is very favorably balanced in favor of the
former, time is the only element one cannot quantify. At this point there is
little value at looking at the immediate future, as the first half of this year
remains a washout. One needs to push the investment horizon to 2022 and
beyond to watch how corporates recover from the lockdown.

How is the mood among your clients / investors as regards equities as an

asset class?
There is, of course, a concern given the steep correction. Some of the smaller
market indices have seen lows that have gone back to 2006. In this context,
feedback from investors is fairly balanced. While there is a concern at one end,
but they also understand that there is low valuation risk in the system. The
preference right now for new money is to sit on the sidelines till things get a bit
clearer.

What is the likely dent on the economy and the corporate earnings for
financial year 2020-21 (FY21)?
The first quarter of the financial year (April – June period) accounts for 15 per
cent – 20 per cent of corporate India’s turnover. If the problem does get
resolved and the pandemic risks ease, it will give India corporates reasonable
time to gear up for the second half of the year. Earnings will fall for sure, but
there is little sense in trying to predict 2021.