Sanjay Bembalkar warns against chasing story stocks
Live Events
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
The market rally seen in the last 3-4 months has made seasoned fund managers increasingly selective about where they deploy capital. In an exclusive conversation, Sanjay Bembalkar , Head of Equity at Union AMC , shares his nuanced view on current market dynamics while issuing a pointed warning about certain sectors that have captured investor imagination but may be running ahead of their fundamental strength.In this chat, he lays out his preference for consumer discretionary , industrials and financials. Edited excerpts from a chat:Indeed, markets have rallied in the past 3 months. However if one takes a broader view of the various market caps, midcaps and small caps have taken a breather for the last 12 months and undergone time correction. Secondly, Q4FY25 has been the 2nd consecutive quarter where mid-caps and small caps have delivered better than expectations in terms of fundamental performance. Finally, the overall valuations premium which these companies were getting have undergone correction though they have not become cheap. If we take stock of these changes, we believe midcaps and small cap companies may offer better growth than large cap companies at now corrected valuations which are making us positive on mid and small cap category from here on. Our current view is positive on large cap, mid cap and small cap categories.Projecting short term is always tricky. If we consider what has transpired since the Budget, tax benefits and reduction in interest rate trajectory should add a significant disposable corpus in the hands of the middle class. Whichever way this money gets spent, either it will end up in consumption or investments leading to better prospects for the economy. Government spending should be elevated considering its push for infra as well as now changed prospects for defence spending over FY26/27. Overall tariff uncertainty should subside over a period of time and should provide us clear direction on exports growth over time. As it has been well understood that India is one of the bright spots on the global economic and investment horizon, we believe, backed by fundamentals and favourable flows due to India's positioning, markets are poised for a next positive trigger to unlock value.The Q4FY25 earning season was better than expectations. However, one should note that expectations were quite muted thanks to long drawn slowdown in consumption and limited pick up in capital expenditure spending. The market did not yet see true animal spirits on capex announcements. Considering uncertainty on geopolitics and tariff, markets may have to be patient and wait for 2-4 quarters before we see continuation of capex announcements gathering momentum to align with market optimism.We have observed that once uncertainty subsides, market participants focus on earnings growth and quality of companies business. We believe if these companies are bought at a reasonable price, they have the potential to deliver superior returns to investors over time. Hence, currently we are focusing on companies with domestic businesses and clear growth prospects. In our view, such companies are available in financials, consumer discretionary, industrial and defence space. Many of these companies might be of strategic importance where we believe the government would be keen to protect these companies in unforeseen circumstances. Considering the spending: we are positive on consumer discretionary, industrials and financials. We are underweight on consumer staples, IT and energy.We do not take cash calls in our open-ended schemes; we remain fully invested in funds due to our constructive view on the markets. The situation however remains dynamic due to current short-term uncertainty in geopolitics and tariffs.We are quite cautious on narrative focused sectors which have delivered disproportionate returns and are not backed by robust fundamentals. Such sectors/themes are reminders for investors that equity is a risky asset class with non-linear return profile. There are pockets of these companies in sectors like industrials, exports space which have run ahead of fundamentals and may see time/price correction.Investors are offered 2 key asset classes by markets: 1) Efficiency assets class like fixed income, stocks which derive its worth from underlying cash flows and 2) Scarcity assets class like gold, silver, rare coins etc which derive its worth from demand and supply of these assets. Since these assets derive their value from various factors, they typically have negative correlation in their return performance. We believe investors may take benefit of this characteristic and construct a robust portfolio for long term investment goals. Our current preference is: 1) 20-25% allocation to bullion assets like gold and silver and balance can be allocated between debt and equity depending on risk appetite of the investor. If required, we recommend investors to take help of financial advisors who can guide them over a period of time. In the equity portion, we recommend entering markets over 3-6 months via systematic route due to volatility expected in the near term.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
7 hours ago
- Economic Times
Biocon raises Rs 4,500 crore through successful QIP
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
Economic Times
10 hours ago
- Economic Times
BSE introduces AI tool to speed up SME IPO document checks
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel BSE has launched a new generative AI tool to help speed up the initial checking process of SME IPO documents. Right now, vetting these documents can take several days or even weeks — but with this new tool, experts say the process could be reduced to just 30–40 per a recent circular, merchant bankers — who handle IPO filings — will be given access to a special folder where they can upload draft IPO documents. The AI tool will scan the draft and highlight any sections that need improvement or corrections before final submission."This tool is meant to improve the SME listing experience," said BSE. The AI tool will be accessed through a secure file transfer system (SFTP) and will serve as a pre-check mechanism, helping bankers make the draft more compliant before officially filing it with the its inception, the BSE SME platform has listed around 600 companies and helped raise nearly Rs 9,500 crore. The combined market value of these listed SMEs is over Rs 68,500 you include companies that have shifted from SME to the main board, the total jumps to about Rs 1.73 lakh crore. Around 200 firms have made that move so Joshi, founder of MMJC and Associates, called the move a 'progressive shift.' He said that while document vetting usually took a week, this AI tool could do it in under an hour. However, this facility is just for initial advice. The BSE will still review the final filing in full before giving official read: Sebi proposes 5-point AI rulebook for securities market. Check details This AI tool won't replace BSE's review, but it will help merchant bankers catch and fix issues earlier — making the IPO filing process smoother and faster.
Time of India
10 hours ago
- Time of India
Nithin Kamath: Why the broking business isn't as glamorous as it seems
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Zerodha co-founder Nithin Kamath has offered a candid assessment of the hidden risks in India's broking business—particularly what he calls a 'massive concentration risk' that the market rarely talks a post on X, Kamath recalled a conversation with a veteran from private equity who had evaluated a broking firm in 2008 but backed out. 'The revenue was concentrated in just a handful of clients,' the investor had said—something that spooked them. At the time, a very small group of traders generated most of the exchange turnover. 'This was a lot worse back then,' Kamath forward to today, and while the number of retail traders has increased, the problem hasn't gone away—it has only shifted shape. 'For us, it's over 80%,' Kamath said, referring to the share of Zerodha's revenue that comes from just two F&O contracts: Nifty and Sensex. He added that this trend is true for most brokers in a risky dependence. 'That means one change can wipe out a big chunk of our revenues,' he makes it worse, Kamath pointed out, is the lack of alternative revenue levers in India. There's no payment for order flow (PFOF)—a controversial but lucrative practice in countries like the US. Cryptocurrency trading is largely off the table. And new rules such as quarterly fund settlement, which require brokers to return all unutilized funds to customer accounts every quarter, add operational stress.'I wonder why the brokerage business looks so sexy from the outside,' Kamath reflection is a rare public unpacking of how regulatory limits, market behaviour, and structural dependencies create a fragile business model—even for India's most successful brokerages.
