'Auto sector ripe for cyclical recovery', says Vinit Sambre

The Indian equity market holds a promising outlook for the future on the back of economic recovery post Covid-19 and superior corporate earnings growth: Sambre

With the markets turning volatile due to geopolitical and macro headwinds, Vinit Sambre, head, equities, DSP Investment Managers, tells Nikita Vashisht in an interview that investors should follow systematic investment plan (SIP) as a strategy to remove the timing effect. Edited excerpts:

Equity mutual funds (MFs) are still holding their ground despite sell-off in the market. What's ticking?
 

The Indian equity market holds a promising outlook for the future on the back of economic recovery post Covid-19 and superior corporate earnings growth. Investors are using the current fall in the equity market to buy more units at lower net asset values (NAVs). This strategy of averaging at lower levels has worked well in the past as funds have delivered satisfactory performance over the long-term.
 

Which sectors have seen increased inflows during the past month?
 

Technology, pharmaceuticals and metals have seen increased inflows.
 

Have you changed your strategy, given the current global situation?
 

The global situation is dynamic and it is very difficult to predict the outcome. We are looking beyond the current geopolitical issues to form views on the market and sectors. Our investment philosophy has not changed as we keep looking for companies that have scalable businesses, competitive advantages, high sustainable returns on equity and earnings growth over time. We also try to identify managements that are credible and capable, show passion and ownership, and have a demonstrated track record of execution and superior capital allocation.
 

Which, according to you, are overweight and underweight sectors?
 

We are overweight on banks as we believe they are adequately capitalised. Stress in the books is reducing and they are likely to be the beneficiary of economic expansion going ahead. We are also overweight on information technology as the demand momentum continues to remain very strong. That apart, we are overweight on auto and auto ancillary as we believe this sector has underperformed for the last four years and is ripe for a cyclical recovery. We are also overweight on cement as we see improvement in demand from rising capex.
 

On the flipside, we are underweight on consumer staples, oil-marketing companies and metals.

Should investors go for lump sum investment in MFs right now or stick to SIPs?
 

As markets are going through heightened volatility due to the current macro and geopolitical issues, it would be prudent to follow SIP as a strategy to spread the investment evenly and remove the timing effect.

What are your overall market return expectations in CY22?
 

We would be wary of giving a one-year view as valuations are high and some macro risks, like inflation, are emerging. Our long-term view has not changed and we believe there are ample opportunities available to invest in good quality businesses.

The new-age businesses are further expanding the opportunity size. India’s economic growth prospects have improved; the benefit of which will percolate to the companies in the small and midcap space also.
 

Hence, our advice to the long-term investors would be to remain invested and increase their exposure at any weakness.