Aditya Birla Sun Life AMC Says It’s Time To Buy Into Broader Markets
The market is ripe for buying into stocks that aren’t under the Nifty 50 Index, says Mahesh Patil of Aditya Birla Sun Life AMC.
India’s equity market is ripe for buying into stocks that are not under the Nifty 50 Index, according to the country’s fourth-largest mutual fund manager.
“As a manager of a large amount of money, you have to position the stock early. You can’t buy the stock once it starts moving up,” Mahesh Patil, co-chief investment officer of Aditya Birla Sun Life AMC, told BloombergQuint in an interaction. “It’s time to look at some of these stocks that are out of favour, that have deep value, provided there is decent earnings visibility.”
Patil isn’t alone. Max Life Insurance’s Mihir Vora and Helios Capital’s Samir Arora also told BloombergQuint that they expect small and midcap stocks to bounce back within 12-24 months.
The stock market has seen polarisation within the NSE Nifty 50 since the index bounced back after the government announced a corporate tax cut to revive growth. The benchmark now trades at a 16 percent premium to its 10-year average, according to Bloomberg data. But nearly three-fourths of its constituents are trading at a discount to the historical valuation.
“The quality stocks and so-called ‘growth stocks’ have been at a high premium, way above our comfort zone,” Patil said.
On the other hand, value stocks have been decimated or simply ignored, he said, adding that quality stocks are bound to rise once the market starts to rally.
The catch, however, is that it’s difficult to tell when the particular small and midcap stocks will bounce back. Patil said that if an investor is prepared for some near-term pain while investing for 1-3 years, there is reasonable risk return. “The downside is kind of limited now so that gives you some courage to go and buy these stocks, sit on them and really wait for them to discover their true potential.”
To be sure, Aditya Birla Sun Life will probably remain overweight on some of the Nifty 50 stocks. Speaking about the distribution of investments, Patil said he likes growth stocks—despite them being expensive—especially at a time when growth is scarce in an economy. “Will still want to be in names that are gathering market share. Valuation can’t be the only factor there.”
As for the polarisation within the Nifty 50 Index and the divergence between large cap and other stocks, change will only be visible once the broader market sentiment improves. “That is where you see money moving away from top 5-6 stocks to broader markets,” Patil said, adding that the breadth of the market should improve in one to two years.
Other Highlights:
- GDP growth has probably hit rock-bottom, print should improve in second half of 2019-20
- It will not be a big V-shaped recovery, it will be a slow and gradual recovery.
- While FII flows have been negative, things are improving.
- Have to wait and see how things pan out in this festive season, but have witnessed positive signs.
- We haven’t seen any meaningful uptick, but things should improve hereon.
Watch | Aditya Birla Mutual Fund’s Mahesh Patil is looking beyond the Nifty 50 stocks