It’s Time To Be ‘Selectively Opportunistic’, Says Kotak AMC’s Nilesh Shah
Nilesh Shah on ‘selective optimism’, the need to be ‘fearful’ and multi-decade growth opportunities.
As corporates stare at yet another quarter of missed earnings amid the disruptions caused by the coronavirus pandemic, Kotak Mahindra Asset Management Company's Nilesh Shah is being “selectively optimistic”.
The rally in India’s equity market brings the need to be careful as it is close to reaching its fair value, the group president and managing director at the fund house told BloombergQuint in an interview. “This is the time to be neutral to equity allocation rather than overweight.” There is, however, enough space to be optimistic as the disruption in business will result in lower competition and increased market share for the companies that make it through, he said.
He advised investors to put money in companies with good quality balance sheets, which are leaders in their sectors and are relatively less leveraged as they will be the ones to grow once the country returns to normalcy.
Investors who have put their money in cheaply-valued penny stocks need to be “fearful”. There are a series of stocks that have run up probably without the backing of fundamentals and merely due to increased participation, he said. “Experience suggests that this sort of a rally generally ends in a disaster.”
Shah has built his portfolio in a way that protects him from the risks of the pandemic. He is investing into sectors that promise multiple decades of growth — chemicals and contract manufacturing.
India’s chemical companies are slowly and steadily increasing their share in world exports, presenting the emergence of “multi-million dollar contracts” for some. “We think this is something like the IT industry in early 2000s.”
In contract manufacturing, Shah said the companies supplying consumer durables to global brands for selling in India, now will be supplying for selling globally. “Suddenly their markets will expand 10-20 times.”
Both these, however, are from a long-term perspective which will require patience, according to Shah. “You have to make sure that while you are focused on long-term growth, you don’t overthink in the short term.”
Watch the full conversation for Shah’s view on the future emergence of India’s manufacturing sector.