Nifty Expensive, Rest Of The Market ‘Fairly Cheap’, Says Ambit CEO

At a time when the “value versus growth” debate is back to the forefront, Sushant Bhansali reminded investors the “expensive” Nifty 50 doesn’t represent the entire market.

“The market might look expensive but that’s only the index. The rest of the market is fairly cheap,” the chief executive officer of Ambit Asset Management told Bloomberg Quint’s Niraj Shah in an interview. The index’s exceptionally high valuations can be attributed to the string of economic crises in India since demonetisation, he said.

The 50-stock index is currently trading at a one-year forward price-to-earnings multiple of 26.6 times, according to Bloomberg data. That compares with its 10-year average of 17.3 times. The Nifty 50 is also trading two standard deviations above its historical average.

The last few months, however, have seen a relatively broader based rally led by the green shoots of an economic recovery as India began easing lockdown curbs.

Asked about his firm’s investment strategy, Bhansali said it would stick to the “tried and tested” names that do well in any economic environment. While the broader based rally, which includes investments into cyclicals such as metals, is likely to continue for some time, the investment would be a technical one, he said. “It’s not a buy and hold strategy.”

“We don’t try to place trading bets because most of these trading bets are more hope-based that the economy will pick up,” he said.

Sushant Bhansali’s views on various sectors:

• Valuations in cyclical sectors such as metals, oil & gas, capital goods and infrastructure yet to catch up. Suitable for technical trade.
• Staying away from auto companies that have a heavy mix of commercial and utility vehicles.
• Investing in real estate through an indirect play—building materials.
• Specialty chemicals likely to have similar decades-long growth like IT. Will continue to prosper through the 2020s.

Watch the full conversation here: