June qtr could see some more earnings downgrades: Anoop Bhaskar, IDFC MF

We have raised cash levels across several of our funds, both for funding redemption pressure as well as pouncing on emerging opportunities, Bhaskar said

Equity investments are not meant to be viewed in the context of a few months, rather few years and preferably at least a decade, believes ANOOP BHASKAR, head of equity at IDFC AMC. In an interview with Puneet Wadhwa, he said that investing with a short-term view would be akin to crossing a busy highway blindfolded. Edited excerpts:

Is this the right time to invest in stocks?

What could have been penciled as a normal bull-market correction, now threatens to develop into a full-blown bear market. In such a context, investing in equity with a short-term (less than one-three months) horizon would be akin to crossing a busy highway blindfolded! Sure, one may survive, even escape unscathed, but this would not be the prudent thing to do. Equity investments are not meant to be viewed in the context of a few months, rather few years and preferably at least a decade.

 How have you navigated the first half of 2022?

 

As a first step across several funds, we raised cash and focused on reducing Beta. Every market correction is unique and lessons of the past seldom equip one to master such potholes without stumbling. Our funds are broadly classified into Value and Consistent Growth & Quality matrices.  Usually, value segment of the market underperforms during a market correction.

This time, the higher valuation of ‘Consistent Growth & Quality’ has taken a few missteps more than ‘Value’. Hence, the traditional pockets of hiding during a bear market – Consistent Growth & Quality – has been impacted, perhaps more than the cheaper and ignored ‘value’ segments. We have raised cash levels across several of our funds, both for funding redemption pressure as well as pouncing on emerging opportunities.

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Would you suggest diversification into overseas markets at the current juncture?

For investors aiming to diversify across global markets, the US remains the key market to which allocation would be essential, nay an imperative to achieve the above goal. Hence, the recent opening up of investing in US markets provides such an opportunity. However, we still believe in the India story and domestic investors should allocate a significant portion of their capital here, as the GDP outlook and earnings growth remains robust.

Your expectations from India Inc's June quarter earnings?

The June 2022 quarter could see some more earnings downgrades. The March 2022 quarter had an upgrade /downgrade ratio of 26:74, as compared to 80:20 for the March 2021 quarter. Earnings expectations from the March 2022 quarter were low, as the world was overwhelmed by an unprecedented commodity price headwind. The full impact of current prevailing prices would be registered across June 2022 and September 2022 quarters, which could result in further downgrades.

Companies have been taking price hikes to pass on higher costs. At the same time, most commodities have been softening on account of expected slowdown in the US. As a result, there is a good possibility of upgrades emerging from December 2022 quarter results.

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What's the ideal asset allocation mix investors should have?

Asset allocation strategy could vary based on the risk profile and various investing goals. For a typical investor, a well-balanced portfolio of equity and debt is suitable since the risk is mitigated substantially. Rather than taking or increasing exposure to metals, exposure towards metals such as gold could be part of investors’ asset allocation.