Global inflation, rise of interest rates, disruption of supply chains & rising crude prices have contributed to outflows across most of the Emerging markets…Prateek Pant speaks with Manish M Suvarna
Prateek Pant, Chief Business Office, WhiteOak Capital AMC, said that at WhiteOak Capital, “our strong belief is that money is made in stock selection rather than betting on sectors or themes”, while the latter is merely a source of macro risk that ought to be properly managed. “We keep a balanced portfolio to neutralise such risk relative to the market,” he adds.
Here are excerpts from the interview:
Q. In the current market scenario which equity mutual funds scheme would be best for investors?
A: In any market scenario, it is prudent to have a well-diversified bouquet of mutual funds in consultation with the investment adviser who has the best knowledge about the client’s financial objectives and risk-taking abilities. However, Flexicap fund which gives exposure to an investor across market capitalization is the starting point for equity allocation in any portfolio. Additionally, Balance Advantage Fund (BAF) helps a retail investor to ride the volatility and simplify allocation between debt & equity.
It is equally important to select the mutual fund house- how well resourced is the research and investment team? Is there a robust process and valuation framework in place? India is after all a bottom-up stock picker’s market and alpha potential is sizeable, but it is important to have a well-defined investment process to extract this alpha.
Q. FIIs are back in the Indian equity market since July, but do you think they will sustain and get stronger?
A: FII flows are impossible to predict over any time as they depend on a multitude of global variables. Global inflation, rise of interest rates, disruption of supply chains & rising crude prices have contributed to outflows across most of the Emerging markets. Reassuringly though, rising domestic participation has been robust and has acted as a counterbalance to the record FII outflows over the last one year.
Q. Which sector is expected to do better in the long run which investors can look for?
At WhiteOak Capital, our strong belief is that money is made in stock selection rather than betting on sectors or themes. The latter is merely a source of macro risk that ought to be properly managed. We keep a balanced portfolio to neutralise such risk relative to the market.
Having said that, from a stock selection perspective at this time our team finds a lot of opportunities in private sector financials, consumer discretionary, IT services, chemicals and healthcare.
We seek to avoid companies with poor governance, structurally low returns on capital and those facing existential risk.
Also, in general, from a market cap perspective while we invest across the spectrum, we find greater number of opportunities in the mid-cap segment which is highly fertile for alpha generation due to greater inefficiencies that exist in this area. But the way we look at it is that even within the small and mid-cap, what we own is the leadership of any sector or sub-sector of the industry.
Q. What are your views on the current rally in the equities? Does it warrant caution as this has been a swift rally in the past few weeks?
A: We believe that market timing is a futile exercise. Interestingly, we have seen many such ‘rallies’ and also instances of ‘lifetime highs’ ‘or close to lifetime highs’ in the last two decades. Each time the markets have rallied or scaled new highs, similar questions have been raised whether this is a euphoria and it warrants caution. It is thus important to stay invested at all times.
Q. Lastly, the role of asset allocation, within equities — a balanced portfolio to achieve a higher alpha
A: I would like to state that we are a very bottom-up stock selection driven team. Our investment philosophy is such that we consciously avoid market timing or sector rotation or other such top-down bets. We stay fully invested at all times with a bottom-up approach of investing in great businesses at attractive valuations, and always maintain a balanced portfolio construction to hedge against macro risks.
