“We are looking beyond the festive season. Our proprietary system is rotating sectors and moving into pharma, IT, infra, BFSI and auto as we go into the next quarter,” says Kanika Agarrwal, Co-founder, Upside AI.
In an interview with ETMarkets, Kanika said: “The idea for most investors is to generate a 10-15% return over the long term which helps them achieve their long-term goals. This is extremely doable without undue risk by just being systematic and sensible” Edited excerpts:
What is your take on the RBI policy meeting? Do you see further tightening by the central bank, and how will it impact the market?
The RBI has done a far better job than central banks of most major countries. It has managed market expectations and been sensible in its policies during and post the pandemic. The rate hike was along expected lines and we are nearly at 0% real interest rates (maybe 1-2 more hikes are on the anvil to get us there).
More importantly, is the confidence of the RBI in the economy – the Governor talked about good monsoons, credit expansion, and CAPEX focus, which are all great tailwinds for the economy.
The market seems to have factored in high inflation and the bad news flow from US and Europe. Negative surprise risks are the unknown-unknowns.
It looks like there is a big resistance near 17500-18000 – do you see a recovery in the markets in October? History suggests that the market closed higher in 8 out of the last 10 years.
Short-term forecasts are nearly impossible to make given how many moving parts there are. We are long-term, long India and therefore confident of markets moving up and to the right over the next few years.
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Having said that, I think investors that have consistently bought through 2022 will see above-average returns long-term as there have been lots of good buying opportunities with the corrections and volatility.
What should investors do with Gold this Diwali?
Gold should always find at least ~10-15% weight in a portfolio given its negative correlation with equities. This is particularly true in India because gold is also an elegant way to play currency.
Gold USD may have proven to be a poor investment over the last few years, but in India, it allows you to play currency depreciation in a very accessible way.
We have specifically built a product that can toggle between equity, debt and gold to reduce volatility while chasing NIFTY-level returns.
Which sectors are likely to do well in the festive season?
As is always the case, lots of “festive” stocks are usually priced in. For example, over the last six months, consumption stocks have done 10-20% better than the NIFTY.
We are looking beyond the festive season. Our proprietary system is rotating sectors and moving into pharma, IT, infra, BFSI, and auto as we go into the next quarter.
After about 1000-point fall seen in the Nifty50 – what things which you advise investors to avoid doing?
What not to do is to panic sell and invest in FDs. Secondly, don’t “throw good money after bad” trying to constantly average trading positions if you do not fundamentally understand the business.
Lastly, avoid F&O and leverage.
Howard Marks sums it up nicely: “in addition to magnifying losses as well as gains, leverage carries an extra risk on the downside that isn’t offset by accompanying upside: the risk of ruin.”
I think what’s great over the last couple of years is the level of financial market participation we have seen from retail investors.
There will of course be a pullback on the volumes and numbers in bear markets as traders leave the fray. But my hope is the market has also added “investors” and not just “traders”.
For investors, advice for the markets has not changed in the last 30-40 years. Stay invested, invest consistently and don’t depend on the stock market for your household income.
Indian IT stocks are at multi-year lows – if someone has a time horizon of 2-3 years can they turn out to be wealth creators/multibaggers?
We are bullish on IT. The sector is an “essential service” – there is no business in the world that doesn’t need tech support to run. The market has reacted harshly to the sector’s headwinds this year and stocks are down 20-25% in the last six months.
Having said that, it’s not like all stocks will be winners in the space – like with anything else, it comes down to stock-specific picks.
Given the level of correction (we are currently at Jan 2021 levels on the IT index), there is definitely an opportunity for outsized returns.
If someone is planning to rejig their portfolio – what should be the right portfolio mix amid rise in interest rate environment?
I think a sensible asset allocation strategy is key. If you are 100% in equity, no amount of stock rejigging will save you from volatility.
This is a great time to open your portfolio and allocate across large/ mid/ small caps, long-term/ liquid debt, gold, REITs, etc.
The idea for most investors is to generate a 10-15% return over the long term which helps them achieve their long-term goals. This is extremely doable without undue risk by just being systematic and sensible.
The big festive sale is on D-St as many largecap, mid and small-cap names are available at 20-50% discount to their respective 52-week highs. What is the right methodology to be followed before investors look at buying these stocks?
I fully agree. As I mentioned earlier, this year is a great time to buy into the market in a disciplined manner.
For us at Upside, our approach is to take out human biases and emotions from decision-making by using machine learning algorithms.
Having said that, we are still investors and not traders. We use macro and company-level fundamentals to make investment decisions and hold for the long term.
We have been fully invested this year as that is what our system indicated. We had larger-than-average large-cap positions for the last few months and the system indicates a slight move toward small caps now.
Our general philosophy is that it is impossible to time the markets and you will lose more money staying out than staying in.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)