Head Equities, L&T Investment Management
Venugopal Manghat is Head - Equities at L&T Investment Management. He manages L&T India Large Cap Fund, L&T India Value Fund, L&T Business Cycles Fund and L&T Arbitrage Opportunities Fund. Venugopal also manages the equity component of L&T Equity Savings Fund and L&T Monthly Income Plan. Venugopal has an experience of 21 years in equity markets in India. Prior to joining L&T Investment Management, he was Co-head of Equities at Tata Asset Management. He has worked for more than 16 years with Tata Asset Management Limited having joined as a Management Trainee and has worked in various capacities including as dealer for equity & debt, as research analyst for equity & credit, as Head of Research and managing some of the key equity and hybrid schemes for the company. He started his career as a research analyst on the sell side before joining Tata Asset Management. Venugopal holds a Bachelor of Mathematics and an MBA in Finance.
Q. Post victory of BJP in recent elections, the markets have seen a bullish run. How do you assess the market valuations today across different segments /market caps?
Answer: Market valuations are currently above long term averages. Midcap indices seem more expensive than large cap indices at this stage given their out performance over the last two years. However, one needs to keep in mind that the economy is in a gradual recovery phase. Earnings growth has been weak for the last two to three years and valuations are looking expensive given this construct. As the economy moves into an upcycle, earnings should improve and on that assumption, valuations are reasonable.
Q. The effect of demonetisation didn't seem to reflect in GDP numbers to the extent many feared. Do you feel we are past demonetisation's negative effects or will it continue to impact growth for Q1?
Answer: It is hard to predict the impact of demonetisation. We did not have a major impact in the December quarter as demonetisation happened in the middle of the quarter and there was festive season momentum in demand prior to that. Companies also adapted to the new environment rather well thereby softening the impact. However, I feel that the adverse effect will be more visible in the March quarter particularly in sectors where inventory levels have gone up in the system. Demand continues to be weak in several sectors, but some of this weakness could be a continuation of the past trend.
Q. What are your expectations on corporate earnings going forward for this year and the next? Answer: This year could be the first year of recovery in earnings after a down cycle, as is the case with emerging markets in general. Given the performance in the first 9 months of the year, I think 8-10% growth in earnings is possible this year. Next year, there is a possibility of having 12-15% growth if the global economic growth trend remains intact and there is no disruption from this year’s monsoon.
Q. What is your fund house investment strategy at present? How are you finding opportunities and deploying funds at current market levels? Answer: We remain positive on the prospects of the Indian economy over the medium to long term and believe that a cyclical recovery is gradually taking shape. Given this view, we are more positive on the cyclical sectors of the economy. We are bottom up stock investors and hence in any market condition, our endeavour is to identify companies that can do well.
Q. For retail investors, what strategy would you suggest to enter into markets?
Answer: My advice to retail investors would be to not try to time the market as short term market movements are very difficult to predict. We expect the markets to do well over the medium to long term as growth momentum picks up. Hence remaining invested is key to making the most of this positive phase. For new investors or fresh allocations always invest systematically.
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