Saurabh Mukherjea, founder & chief investment officer at Marcellus Investment, spoke to CNBC-TV18 about the economic slowdown and how investors should approach the market in the current scenario.
“Despite the depth of the downturn that has taken us aback, the financialisation of the economy continues – especially the flow into insurance policies, the flow into mutual funds and the PMS industry,” Mukherjea said on Wednesday.
“So, it is a painful consumption downturn, painful economic downturn but in midst of that financialisation of the economy continues apace,” said Mukherjea.
When asked how a long-term investor should approach the market, he said, “One is the conventional approach of buying high-quality companies, consistent compounders like HDFC Bank, Asian Paints, Berger Paints etc. Two, the macro landscape gives two sources of pain and two sources of relief. Relief is coming from the RBI and there is a potential of 100 basis points rate cuts in next 12 months and the other relief is from the currency, which is expected to move towards mid 70’s. However, the pain is from the fiscal policy and continuation of accounting issues, governance issues in the corporate landscape in India.”
“So if I join the dots, it suggests looking for exporters, looking for companies that would benefit from the cheaper currency – so good plays in IT, pharma sector. Look for well-run lenders who can benefit from RBI slamming interest rates down and stay away from companies whose accounts, balance sheets, governance is smelly and also away from companies who are dependent on government giving them business,” said Mukherjea.
According to him, “A big part of the downturn is cyclical in nature than structural and with the economic cycle there will probably be an upturn in the next 6-12 months.”