[ad_1]

Siddharth Vora, Fund Manager & Head Investment Strategy, Prabhudas Lilladher, says “till we move out of a value momentum regime and move to say a quality oriented regime, I do not think owning HDFC Bank would add any significant alpha to my fund. For those reasons, we stay out of these. As of now, we would continue to stay out of the likes of HDFC Bank or Kotak Bank till their overall scores do not start improving.”

Vora also says: “We take a very benchmark agnostic weighting method. We focus on four key sectors here: financials, industrials, energy and auto.”

Do you think this consolidation, this sideways move, this boring kind of market is likely to continue at least for the interim given the lack of the triggers?
Siddharth Vora: We are at a very interesting stage in the market cycle when we look at the valuations at Nifty levels. We are still significantly 15 to 20% below the long-term averages which is causing some pain in the markets. As per our proprietary valuation indicators, we take a very quantitative approach to researching and managing money. So based on our quantitative indicators, more than 70% of all the stocks in the mid and small cap segment in India are trading at least one standard deviation above their historical multiples and that is a cause of concern coupled with all the euphoria that we have seen in the rally that has built up so far.

Unlock Leadership Excellence with a Range of CXO Courses

Offering College Course Website
Indian School of Business ISB Chief Technology Officer Visit
IIM Kozhikode IIMK Chief Product Officer Programme Visit
IIM Lucknow IIML Chief Operations Officer Programme Visit

Some correction, some consolidation and much higher volatility can be expected in the mid and smallcap space. But I definitely maintain a very positive bias towards equities globally and in India as well. Globally it is supported mostly by the risk-on indicators whether we look at credit spreads which are sub 4 levels or we look at how inflation is cooling off globally.

The soft landing has definitely happened and the US is also in a fairly resilient shape and in India, nobody needs to discuss more on why the next 5 to 7 years belong to India and how we will become the third largest economy by 2028. So a positive bias for sure.

Within largecaps, you are tilting towards autos and financials and I find both the spaces confusing. Given that autos have seen a massive run-up last year and people are now talking about tapering their positions because the valuation has become too punchy and on the financials, people are expecting this underperformance to be a bit more protracted. What makes you positive on these two sectors?
Siddharth Vora: In our portfolios, in the heavyweight sectors, we take a very benchmark agnostic weighting method. We focus on four key sectors here: financials, industrials, energy and auto. But if I look at my financials, industrials and energy, the weight of all of them are more than 25% which is significantly higher than the benchmark allocations. And the differentiated pick here is that within financials it is not that we are focused on private banks alone.

So let us not confuse financials with the likes of say HDFC Bank or Kotak Bank or Bajaj Finance.We have taken a very differentiated approach even to our financial allocation. We have been more prone to PSU Banks, PSU NBFCs, the PFC and RECs and some of the more capital market oriented plays, whether you talk about broker exchanges or any capital market intermediaries. Our financial position, while large, has been differentiated from a traditional financial allocation. Similarly, while valuations could be stretched somewhere, the growth levers are strong enough for these to continue doing well for the medium to long term.But for PSUs, are you not looking at trimming positions at all because they are moving much above their trend lines?
Siddharth Vora: So over the last eight months we have had 28-42% allocations across the PSU pack. more of the PFCs, the RECs, the BPCL, IOCL the whole energy pack of PSU Coal India, HPCL etc. So we are happy holding some of our positions while moving out into more large cap defensive positions. So we should be able to reduce from say 42% to more like 24% over the next couple of weeks.
So you are pruning your positions and reallocating a bit as far as some of the PSUs are concerned but shifting focus to what is happening in the markets and overall the private banking space as well just wanted to scratch that point further with you. You said do not confuse it with the likes of HDFC Bank but for people who are holding it or people who are looking to enter, is it a good time to look at some of these private banking names at least for the medium term?
Siddharth Vora: The way I will answer it is the way we manage money which is very different from what a traditional fund would look at. Over the last eight months, we have not had a single percentage of allocation to Kotak Bank to Bajaj Finance to HDFC Bank at all. We run a 25-stock portfolio which evaluates all the listed securities based on their fundamentals, their valuation, the risk, the technical, the sector strength and the style alignment given the current market regime. Unfortunately, we have been in a value momentum orientation in the market and in that regime an HDFC or Kotak would never fit in.

Till we move out of a value momentum regime and move to say a quality oriented regime, I do not think owning HDFC Bank would add any significant alpha to my fund. For those reasons, we stay out of these. As of now, we would continue to stay out of the likes of HDFC Bank or Kotak Bank till their overall scores do not start improving.

(You can now subscribe to our ETMarkets WhatsApp channel)

(What’s moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Download The Economic Times News App to get Daily Market Updates & Live Business News.

Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

[ad_2]

Source link