Put The Money Back In Markets In Slices: Ashmore Investment’s Ashwini Agarwal
As the equity indices roiled amid the coronavirus pandemic, Ashmore Investment Management India LLP’s Ashwini Agarwal suggested putting money back in the market in “slices”.
“People should look at asset allocation and think hard about what the equity exposure should be,” the founder and partner at the investment manager told BloombergQuint in an interview. “Sell off the underweight equity to where it should be. Reflect on the equity exposure and if you are below what it should be then put the money back in the market in slices.”
This comes as the Covid-19 pandemic stalled economic activities and India went into the world’s biggest lockdown. The International Monetary Fund has already declared a recession. India’s equity market tracked the worst global selloff in more than a decade before recovering some losses as large economies started announcing stimulus. Corporate earnings are also likely to take a hit in the quarter ended March as the outbreak disrupts businesses in an already slowing economy.
Key highlights from the conversation:
- Day to day movements are extremely hard to predict as there are several moving parts: Covid-19 data, huge amount of fiscal stimulus is causing expectations to change on a daily basis, and Indian markets are taking cues from overseas.
- While shutdown is necessary from health and public order perspective, it will create a significant pain for the economy.
- Whether this market rally gets sold into or not can’t say. Economic situation is fairly serious at this point.
- Typically, in the sell-offs, long-term investments reap great rewards, but better to hold on to some cash if one wishes to time the trades in short term.
- Sitting on cash or investing, both makes sense but it is stock specific. You have to do it gradually and pick your bets very carefully as we are stepping through the mind fleet.
- We have been reasonably positive on pharma sector. It has more legs to go. I worry that its become more or less a consensus trade and this works in short period of time. Don’t know how this will play out over the long and medium term.
- Lot of financials are down 70 percent from the peak will see ferocious rallies when risk appetite will return.
- There is value in many of these beaten down names and these will do well when the risk returns
- While we can make some estimates looking at the past data, balance sheet, liability and asset side, one has to be aware that things could turn uglier or better compared to base assumptions.
- Small caps have fallen significantly than the previous peak. There is a lot of value out there, not all balance sheets and businesses are broken.
- There is a lot of excitement for these specialty chemicals and niche pharma stocks. There is a great opportunity here.
Key questions for investors:
- What will be the sustainable value of the franchise when the crisis is behind us.
- Is the balance sheet going to survive or will it need significant recapitalisation.
- As an equity owner will your share be maintained or will it get diluted.
- What is the value that is inherent to the business or intrinsic to the stock and compared to that what are you paying.
WATCH | Ashmore’s Ashwini Agarwal On How To Invest In A Virus-Stricken Market