It’s impossible to expect positive movements in the stock market every day: Kalpen Parekh | Market News

Is it now more difficult to select investable stocks and themes in the market and generate alpha?

Our large cap, diversified and focused thematic funds have outperformed their indexes for the past two years. In many parts of the world, we are witnessing large flows creating tailwinds for prices amid other geopolitical uncertainties. Flows are also driving up valuations. We strive to stay focused on company fundamentals and adhere to sound principles of investing in quality companies at fair prices.

How satisfied are you with the market valuation at this stage?

Valuations are high for companies in the defense, railways, engineering, new energy and power sectors. There is a mix of different stories, improving earnings and stock chasing flows, which is increasing valuation risk here. In these sectors, a solid grasp on return on equity (ROE) and cash flows, not just narrative based future outlook, is now more important.

Meanwhile, prices in banks, the index’s largest weight, have fallen or stagnated despite strong fundamentals. You can invest with confidence because the evaluation is highly reliable. Small and mid-cap stocks are experiencing steady growth, with a lot of money flowing into them, and valuations are expensive. We are confident in recommending staged investments and systematic investment plans (SIPs).

How should retail investors rebalance their MF portfolios?

In India, we have extended the duration of our bond funds due to improved inflation management, fiscal deficit and improving demand for Indian government bonds. This indicates that this rate is suitable for investment and we expect interest rates to stabilize or fall. The global economy remains highly leveraged and will need to repay this debt at higher interest rates than it was two years ago. These interest rates are also fluctuating sharply in both directions. Central banks are aggressively adding gold. Valuations have not come down even as the cost of capital rises around the world.

Given this backdrop, it would be wise to be conservative. If you need the money and are close to achieving your goals, take advantage of rising stock prices. If you don’t need the money, keep your return expectations moderate. Take the risk down a notch by investing in hybrid categories. But for very long-term investors, it is best not to change your portfolio just because of changing macro factors.