Mr. Ravi Gopalkrishnan |
In an interview with Anjali Raulgaonkar from Capital Market Publishers,
Ravi Gopalakrishnan, Head, Equities, Canara Robeco Mutual Fundsaid,
We aim to invest in fundamentally strong businesses and our team analyzes the fundamental attributes, historic business performance, recent developments in operating environment & future expectations.
Excerpts: 1. Equity markets are already up. Is there more room to grow? How are you approaching market right now?
The Indian Equity markets have reached new highs on the back of improving macro economic fundamentals and strong domestic flows. But despite the run up, the valuations of the overall markets are slightly above the historical averages. However, this must be put in perspective with the bond yields which have seen a secular decline over the past 3 years. Hence, if one were to look at equity valuations in conjunction with bond valuations, the expansion of P/E multiples is justifiable. Hence, we believe that over the long term there is a definite room to grow amongst global stagnancy. However, markets can get volatile as corporate earnings have not kept pace and a meaningful revival is still a quarter or two away.
2. What is your investment space? Any stock specific traits which makes it part of your portfolio? What?
Strong research and robust processes that we follow before investing in a company is what really makes the difference for us. We aim to invest in fundamentally strong businesses and our team analyzes the fundamental attributes, historic business performance, recent developments in operating environment & future expectations. Only once a strong investment case is established, will a company be considered to be taken into the portfolio. More specifically, we like to look at companies which have a unique business model, with an ability to gain market share, companies where there is scope for value migration and last but not the least companies involved in Balance Sheet improvement and turnaround/restructuring cases.
3. What kind of stocks you avoid, why?
We usually refrain from investing in highly leveraged companies, companies with a questionable management record on governance or companies solely dependent on outcome of events to drive growth. Such companies do not have any concrete or robust models for generating cash flows and hence no sustainable growth prospects.
4. Is there any pre-emptive miss you regret (for instance, not investing in a stock or not possessing enough of it)?
Our portfolios have seen stable and consistent track record for the past several years. It has been our endeavor to select companies at reasonable valuations that could become a part of the overall portfolio. In the correction seen in Jan-Feb 2016, and post the demonetization exercise in Nov 2016, we could use the volatility in the markets to pick-up really good quality franchises across all sectors which had corrected. However, there are pockets in markets or themes we may have missed. For e.g we were not able to identify the turnaround in global metals cycle and hence missed that opportunity.
5. What will be your advice to investors?
We continue to believe that Indian markets are in the Sweet Spot and offer a great opportunity for domestic investors to create long term wealth. As India moves ahead towards increasing prominence in an ever-more connected world, Indian capital markets could benefit tremendously from the long term positives offered by its demographics, conducive macro-economic environment, improving corporate earnings and government supported initiatives towards financial inclusion & tax reforms, though with a little volatility. For investors, it is advisable to invest in the markets with at least 3 to 5-year investment horizon. The reason for doing this is to smoothen out the volatility in the markets overtime. We believe, time in the market is more important than timing the market. Investors should focus on asset allocation instead of looking at absolute benchmark levels when making an investment decision.
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