Invest in markets now to double your money in 4 years: A fund manager explains why

With the markets hitting record highs and valuations turning expensive, if you are confused as to whether this is the right time to invest in the stock markets, Principal PNB Asset Managment Company’s equity head PVK Mohanan has a piece of advice for you: No doubt this is the time to invest, but for the long term. This is an economy which is likely to pick up reasonably good growth into next three financial years with a stable government at the Centre, he told Firstbiz in an interview. He sees the economy expanding 6.5-7.0 percent in the next couple of years and companies’ market wide earnings growing around 17-18 percent over the next three years. STORY CONTINUES BELOW THIS AD “So with those kind of earnings, it is reasonable to expect that the market itself should give similar kind of returns. In the near term we are a little bit cautious due to the sharp run up. But in the three years or maximum 4 years, we should double our money from here,” he said, adding one should invest at least 70-80 percent of his targeted equity exposure at these levels but with a three-year horizon so that he can take advantage of the entire upside potential. The Sensex hit a life high of 27,354.99 on 8 September. It has been a roller-coaster ride since then. the index hit a low of 26,464.03 on 16 September, down 891 from the life high. The markets were jittery in the run-up to the rate setting meeting of the US Federal Reserve, but are now again on an upswing on hopes the interest rates in the largest economy will continue at low level for some more time. FIIs have invested $33.1 billion or Rs 2 lakh crore in Indian assets in 2014, of which $14.2 billion or Rs 85,176 crore is in equities and $19 billion or Rs 1.14 lakh crore in debt. A rate increase in the US will prompt the FIIs to pull out of the Indian markets. However, RBI governor Raghuram Rajan has time and again assured that the country is prepared for the fallout of such a development. Mohanan too seemed to believe more in domestic fundamentals. “Believe in the growth of India and appreciate its strength. India’s relative positioning is one of strength compared to several other emerging markets and in the longer term compared to several other developed markets,” he said as advice to retail investors. He, however, said retail investors are not yet active in the market. STORY CONTINUES BELOW THIS AD Where to invest “The beauty of this market is that it is willing to reward companies across sectors wherever there is a positive growth momentum or a positive earnings surprise the market is willing to look at them,” says Mohanan. He said the fund house is positive on domestic cyclicals – the sectors that will benefit from the pick up in the economy, from the revival in the consumer sentiment as the urban revival is on its way. The three sectors that he is bullish on are construction, financials and cement. “Roads, highways, river linking project, smart cities, all these are are construction intensive. More or less, construction and industrials are the two sectors that we are overweight on. Domestic cyclicals will be the ones that will outperform and drive the market,” he said. STORY CONTINUES BELOW THIS AD The fund house is there in FMCG, but selectively. As far as real estate is concerned, investors have to be very selective as companies are burdened with debt, he said. He expects banks to see asset quality improvement in the next couple of years but the direction will get established in the next 2-3 quarters. “From the stock market point of view, that is more important,” he said. Moreover, the RBI is now extremely proactively looking at the issues of the sector and raising the red flags well in advance. This he sees as the biggest positive development for the sector.

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Invest in markets now to double your money in 4 years: A fund manager explains why

PVK Mohanan of Principal PNB thinks India is likely to pick up reasonably good growth into next three financial years with a stable government at the Centre

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