India’s long term growth story is intact: Harshad Borawake
Mon, Sep 17, 2018
Source : Jeni Shukla, Citrus Interactive

Mr Harshad Borawake is the Head - Research at Mirae Asset Global Investments (India). He is also the co-fund manager of Mirae Asset India Equity Fund. Mr. Borawake is MBA(Finance) & B.E.(Polymers). Prior to joining Mirae Asset Mutual Fund in December 2016, he has worked with Motilal Oswal Securities Ltd. as Vice President and Capmetrics & Risk Solutions Private Ltd. as Research Analyst - Equity.

The following are excerpts from his exclusive interaction with Jeni Shukla from Citrus Interactive.


What have been the major changes in Mirae equity funds after SEBI’s new categorization norms?


- We at Mirae Asset have always stood for one product per category, since our inception and feel vindicated by our stand, after SEBI’s new categorization norms were issued. There were no major changes carried out in our product classification, with all products continuing the same investment process.


- Mirae Asset India Opportunities Fund (our flagship multicap fund), remained the same, with no changes in the investment strategy and product category, however we needed rename the fund, hence it was renamed it as Mirae Asset India Equity Fund.


-  Similarly we needed to rename Mirae Asset Prudence Fund as Mirae Asset Hybrid Equity Fund (the fund is in the Aggressive Hybrid category).


-  Mirae Asset Emerging Bluechip Fund, since inception was investing ~30% in large caps and remaining in mid and small caps. Based on the new definition,  it was placed in the Large & Midcap category, wherein atleast 35% had to be invested in large caps (top 100 companies) and atleast 35% in midcaps (companies between 101 to 250 in market cap)


-  There was no change in Mirae Asset Tax Saver Fund, which is our ELSS Fund.


- In our Thematic Fund, Mirae Asset Great Consumer Fund, we changed the investment mandate to invest only in domestic equities (earlier it could invest upto 30% in Asian equities)



What is your view on the current market valuations?


We have a bottom up approach and hence headline index valuation has a little significance from a portfolio perspective. 

Nevertheless, to answer your question, I believe that while the headline indices might look fairly valued, underlying earnings are at cyclically low levels for a large part of the corporate universe. RoE’s of top-500 companies are almost 8-10% lower from its previous peak in 2007-08. Hence, comparing valuations based on cyclically low earnings might not give a correct picture.

We believe India’s long term growth story is intact and we will see meaningful wealth creation opportunities in the coming years.



Which factors pose the major risks to the market at this point in time?


Some of the major macro factors (like oil price and currency) that would have a negative impact on the India’s fiscal situation have already meaningfully weakened in the last few months.

We expect the markets in the near term to be influenced by news flow on domestic politics in run up to the 2019 general elections.

While the macros have moderated in 2018 versus 2017, micro is showing better traction as reflected in the recent high frequency (monthly) data points in quite a few categories and improving corporate earnings. Further, 2018 will be a third year of decent monsoon and with increased govt. spends on Infra and other social sectors (esp. in a pre-election year), expect earnings momentum to sustain. 



Which sectors are you overweight and underweight on?


We are currently overweight on consumer discretionary, metals, oil & gas, chemicals and largely equal weight in auto and pharma. We are underweight NBFC, utilities and real estate. 


What is your advice to retail investors?


We would advise to invest in a disciplined way in equities for long-term (based on individual risk profile), within the earmarked asset allocation. We believe that a larger portion should be allocated to the multi-cap funds. In the current market scenario staggered investments through SIP or STP, would remain the best ways to invest in equities to ride through the volatile nature of this asset class.



Do you think the FII flows will continue to be volatile going forward?


I am not expert in this, but we should note that the FII flows are guided not only by the absolute fundamentals of India, but are also driven by the relative positioning versus other markets. 

However, Indian markets in recent period have shown resilience despite FII outflow due to strong DII flows (also led by strong SIP flows).




blog comments powered by Disqus