While markets are abuzz with theories to explain why FIIs are on a selling spree in Indian markets, Anish says the real question we should ask is not why FIIs are selling now, but why so many promoters and PEs have been diluting stakes all these months. Its all about valuations – some sell/exit opportunistically, others raise cash in their portfolios. Always beware of the greater fool theory, he cautions.
Are our economic and market cycles now maturing out of their growth stages? Anish seeks to distinguish between the two cycles.
The economic cycle will hit maturity when we run out of power and cement capacities – that’s still another 18 months away in his estimation. The market cycle however may be maturing now – one has to reset return expectations as markets get back into reasonable valuation zone.
Small and mid cap valuations look most vulnerable, whilelarge caps look less expensive on a relative basis.
Earnings growth momentum is no longer strong across the board – one has to be lot more selective. Anish has been steering ICICI Prudential Bluechip’s portfolio towards pockets of stronger earnings growth momentum.
Relative attractiveness is prompting him to increase exposure to large banks in I Pru Bluechip’s portfolio.
It is reasonable to expect that markets may become somewhat narrower going forward as a result of differential growth rates across sectors. However, breadth will still remain sufficient for actively managed large cap funds to beat their passive counterparts.