We are witnessing a cyclical correction in a structural bull market and as such, the focus should be on using this correction to add to your equity allocation (subject to individual risk profiles)
A good yardstick to measure market valuations is market price/book. 4 and above is overvalued, anything approaching 2 is very undervalued and long term average is around 3.1. As present, after a 10% correction in Nifty, market P/B has come down to 4 (it was well above). Once P/B comes down to around 3.5 (whether from price or time correction), it might be good to begin adding to your equity allocations.
Our market correction has coincided with a rising dollar (DXY). Look for DXY topping out and falling to reinforce conviction in resumption of market rally in India.
Anup believes we should see this cyclical downturn to exhaust in the Jan-Mar 25 quarter on the back of higher Government spending and improved credit growth on commencement of a rate cut cycle. Expect FY25-26 to see resumption of a bull market.
Anup likes banks, select healthcare names, large cap IT, consumer discretionary. He is looking for better valuations to add to industrials and remains cautious on consumer staples as volumes continue to disappoint.
In the SCDV framework, the asset manager remains overweight seculars (>15% RoE, >15% EPS growth), remains underweight value, is marginally overweight cyclicals and marginally underweight defensives. Anup intends using this correction to add to his cyclicals exposure.
He sees merit in holding gold and silver as part of investor portfolio for the next few years and agrees with the notion that spiralling US debt will likely result in a weaker dollar – which has historically been good for precious metals.
He is very excited about Specialized Investment Funds –the new product category notified by SEBI. He believes there is ample scope for product innovation in equity, debt and hybrids using the greater flexibility permitted by these structures – but also cautions that the industry has to upskill itself to manage portfolios with added levels of complexity.