Investors must evaluate their earnings next year to gauge investment worthiness: Expert View

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Despite domestic equity markets starting to evolve, uncertainty is also returning straight now for six weeks. Vikaas M Sachdeva, CEO of Emkay Managers Ltd said the odds in the face of the increased volatility would favor quality stocks. Besides, the odds are high. The business veteran expresses his views on banking and finance stocks in an interview with Kshitij Bhargava of Financial Express Online. In March this year, he shares his outlook on the international inflows that abandoned Indian securities but also decodes the trend in the mutual funds market. 

First, there was a heavy debt redemption of mutual funds and now we are witnessing a drop in equity mutual fund’s inflows:

These two events are uncorrelated. Debt MFs are facing AUM swings at the quarter-end – it was rather similar last quarter. The SIP balance stands in the region of around $1.1 billion a month as far as mutual funds are involved. A confluence of unforeseen factors has poured cash into stock trading and PMS approaches in the last quarter. One is the time it took people to research their investments and stocks. Secondly, the ease of which retail brokering accounts and trading is opened. Thirdly, the indices last quarter showed a substantial increase.

The large-scale strategy, Emkay 12, has surpassed Nifty:

Emkay’s 12 has a different ‘Smart Alpha’ system that discusses the mitigation of a fund management mechanism for the collection and allocation of vulnerabilities. Intense rigor and consistency are introduced from a universe of the Nifty 100 stocks and take care of the selection bias in a portfolio of 12 high-quality stocks. More often than not, the Nifty is pushed ahead by a balanced portfolio like this. The “allocation bias” is taken care of in turn by the distribution and regular re-balancing of the equal weight of these stocks.

Emkay 12 has a weight of 30% allocated to BFSI, but many think the outlook is bleak given the pandemic in the sector:

In the BFSI market, we are presently underweight. Regardless of an extension of moratorium (for another three months) and uncertainty created for COVID, credit costs are likely to remain high through the financial year 2021. We are closely monitoring this region and will change as clearer patterns begin to emerge.

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