Where should I invest in 2024?

We manage other people’s money, and we’ve been managing other people’s money for a long time, so as far as old money is concerned, you know there are people. I must thank all the people who invested with us earlier because they got very good returns. Even for people who want to think, you know we’ve been in a bull market for a long time. In the recent past we have seen a boom only in midcap and small cap. If you look at the 2-year returns in large caps, most of the returns have probably come in the last month or few months. So there is a situation where the large cap boom has started recently and that is the challenge. How long this bullishness in large cap will last is not a cheap valuation, but for two years, large cap has underperformed midcap and small cap and this is a challenge. We have seen previous years like 2009 and 2014 in election years for ICICI Bank and the challenge for us is that I think the scale of the rally will depend on the volume of FII money and that is very difficult. A guy like us predicts how much money will come from not investing after 2021. Where should I invest in 2024?

Invest in 2024

For 2 years, they have virtually not invested except for short periods, so it is a tough task. At this point, but the real move, I think, is going to be in large caps, and how much the move will be, we’ll never know.

Our model is quite simple; You know, when we get money, we have to invest, and it’s not like there’s no fundraising, so if you look at this year, for example, continuously, we had QIPS. We’ve had IPOs, and we’ve had secondary sales through a lot of private equity that made sure that a lot of the money raised actually went into it, so it’s not like you know the money came in and you just bought all the stock in the secondary market; Much of it has gone into the primary. If you look at the secondary selling on these three groups, i.e. IPOs, QIPs and people like private equity, that’s what has happened, so it’s not like money has just flowed into the market; It didn’t happen.

Behaviorally, we keep asking people to invest more in large caps but imagine the kind of boom we have seen in small caps and midcaps. It is very difficult to say that I will not invest in midcap and smallcap because every midcap and small-cap goes up like a rocket. It’s true, if you look at most of the megacaps over the past two years, what have they returned? They have rarely returned. So it is not that any AMC has said that I will not invest in midcap and small-cap. I’m sure FlexiCap funds will also have a fair amount of midcap and smallcap at this stage because the reality is that if you had avoided all midcap and small-cap it would have been very difficult to make a return. We think 2024 is going to be the year of large caps and large caps, right? Because you have very little money coming from FIS for two years and I think the return should come in 2024 if FIS comes. If I say I will not invest, I don’t think you will get huge returns because I think domestic investors have invested huge amount of money.

I think banks will give reasonable returns, but you know banks as a sector is not the least invested sector among all funds, so if we all are going to get money and FIIs are going to get money, in which sector will they invest? in? Certainly, I think the banks will definitely do better because money flows out. At the same time, if money is coming out, that’s the area people sell, so you have to keep that in mind. But from a cyclical perspective, I think this is an area where the negative impact of the net interest margin is substantial. A lot of concerns have arisen. I don’t think there is any major risk of an increase in near-term non-performing loans. The corporate sector is in deep trouble. I think banks with very good deposit franchises will do well in the next couple of years, but ultimately, it depends on the flow. Banking depends on flow. Well, if the FIIs get out, they will sell the banks. If there is a domestic exit, they are going to sell to the banks. On the other hand, if each of us gets inflows, they’ll all buy banks because it’s around 30% or so of the benchmark.

NBFCs, you have to be more careful. I think the real area where we need to be careful is fintech, but fintechs aren’t listed, so luckily for us, we don’t have to look at them. In case of NBFCs, some extraordinary NBFCs manage risk as well as banks, so in such cases, we have to do valuation analysis rather than risk analysis at this stage and it is not that they have managed their risk that way. We need to worry, but there are also nbfcs, you know, good nbfcs, average nbfcs and below average nbfcs. They are very good nbfcs. You can’t look at them and say, you can say they’re all one way and say either positive or negative at this point, and the reality at this point is that I think the deposit is just as important. As people who can raise cheap resources. I think their situation is good, be it NBFC market or bank market.

I think you have to go to the bottom in insurance, you know, and up. I mean, some of them have gone through lateral movements for a period of time, so I think we have to do a lot of bottom-up work there and then analyze. So I think it’s kind of a no-brainer to look at it, and some of those cycles, you know, January to March last year were fantastic, so the base effect is a challenge for the next 3. . That’s up to 6 months, but once people understand that this is the underlying impact of the game, I think people will realize that the long-term perspective is still good and you can’t just look at your ongoing trends. It’s going to be interesting how many people look at your current trends because January to March last year was fantastic for various insurance reasons, so people shouldn’t look at years. If they look at year-over-year, year-over-year insurance will average out, and that’s what we’re going to see. If you look at the market like that, there is no pocket, which is very cheap. I mean, we have such a big bull market that if we come in and say well, I’m going to look at this area of ​​the market, which is very cheap, and invest aggressively, that scope doesn’t exist. At this point. You just have to look for relative cheapness or hope for a trade that goes from fair value to overvalued. This is a trade off that you have to find. Can it happen? Yes, because India is one of the few structural stories in the world at the moment and well for someone like me, I’m looking for a trade-off from fair value to overvalued is very difficult for me, but it’s something. It could well happen in 2024 at this point.

The catalyst is that the Fed cuts rates, then people say we have to invest in emerging markets, then the domestic inflows have never slowed down anyway, so you have domestic inflows on top of FII inflows. Actually, in the last two years, you have a situation where you have domestic inflows but not enough FII inflows, so if you have a situation where you have both domestic inflows and FII inflows together, it creates a very uncomfortable market for people. Those who view evaluation as we do.

Markets are completely unpredictable in the near term and when we look at all the major emerging markets in the world and compare them, how many markets do we have where we have macro where fiscal is under control, current account is not under control and inflation is under control? The corporate sector is in good shape and the only problem is the high valuation. I am not able to see an emerging market with all these conditions, so could it happen? I can see that in the near term valuations may increase, but in the very long term, valuations play a role and are a challenge, especially when we are managing other people’s money. So, in the near term, valuations can be as high as you want them to be, and it’s something learned from years of managing other people’s money that this could happen in 2024, and that’s a concern when you’re managing other people.

We obviously like mega-caps and everything that has happened in the last 3 years is slowly happening. If you look at our large-cap funds, you’ll see that megacaps have fared worse than small-cap and midcap apps, so people have asked this question. If you go across sectors, you will see that smaller banks have fared better than larger banks. See how small companies have fared against the big ones. See how small consumer firms have fared against large consumer firms across all sectors. What you see at this stage is that megacaps have underperformed small companies, and if you look at a large portfolio, you also see that people have gone through mega-caps relative to the benchmark and they’ve benefited from that, so I think this is the year. Where you go and say, let’s buy megacaps because megacaps have underperformed for three years. People asked us three years ago, why don’t you have these mega caps? At that time, it was hard to tell people that they didn’t look cheap with mega caps or quality stocks. At that time, it did not look cheap compared to small caps, PSUs, telecom companies, metal companies and various others. Three years later, those companies have skyrocketed, and these companies have rarely participated, so at this point we feel that way. It’s to execute, and then you never know how long these trends will reverse or reverse, and that’s where the relative value lies. As I said, there is no pocket where the market can be said to be completely cheap, so you look at relative value at this point.

Wherever you go, you cross over. Like I said, you’ll go to banks, you’ll go to consumer companies, you’ll go to those companies, and you’ll go to conglomerates everywhere. That’s the situation at the moment, and if you look at it, bad news and a bad share price don’t go together. Three years ago people said, how can PSU deliver? Looks like the PSU can’t deliver. Does anyone ask these questions today? No one asked these questions, so somewhere, no, and today you can find a reason and say that this mega cap has a problem or that mega cap has a problem. I’m sure you’ll find the answer to why this mega cap doesn’t deliver, but the reality is that you know good news and good share prices go together, so we’re looking for bad news and bad share prices together, and then sometimes some of that. Things make sense again, and the challenge is patience, and at this point we think about it.

You might be in information technology and have to buy more slowly in those discretionary spending areas because the near-term outlook looks bleak, but it’s not like you know that now that information is democratized; Does anyone know it? So it happens that for a while, everyone knows that the outlook for discretionary IT spending in 2024 is bad; It gets a price, and once it’s priced, sometimes the opportunity still exists because almost everyone knows it and everyone underweights the sector. It happens, and it’s part of investing today because, compared to the ’90s, what’s different in the ’90s is that information is democratized. Even if you have a good internet connection and a good laptop or iPad, you’ll find that discretionary IT spending is a problem in 2024.

Everything seems like a much better sip model than a big lumsum model, because, at some point, if you’d asked us six months ago, I would have said I’d be waiting for the big fall to buy now. How do you know if the market will fall? So it’s good to sip and say because at the end of the day, at the end of the day, in three years, you’re not going to have a situation where some of these companies don’t recover, so no matter what level they come to, they’re all attractive, so instead of saying, you spit, wait for that big fall because That great fall may never come, and given that India has arrived, this is what it looks like at the moment, and we have to accept that it is India. One of the best structural stories at the moment from a growth perspective over the next three to five years.

So, if you look at that, if you don’t look at the near-term risk cycle, I think the financials certainly look good from that standpoint. I mean, if you look at it, you know a lot of these cycles, for example, some of the discretionary consumption sectors, are going to do very poorly over the next year, so those are all sectors. You know, obviously, these are areas. For example, if you look at staples or retail, they’re doing pretty bad, so those are all areas, obviously, that you want to improve and buy. The challenge from an investor’s point of view is that if you want to buy at a certain price, that price doesn’t come, and you know that the near-term outlook is bad in some of these sectors, but despite that, the price that you’re looking for doesn’t come. At the same time, you know the outlook for the next 3 to 5 years is good, so how do you buy? That’s a challenge that we’re seeing and that’s what makes it more complicated for us to invest because if you’re in many other parts of the world, other than those seven stocks, the kind of improvement that we’ve seen in many other stocks. While we, if you look around the world, have seen meaningful improvements in the market which have given you an opportunity to buy, stock picking in India is difficult. As these stocks were cheap in 2020-21, identifying those cheap stocks in 2023 was not an easy task.

One lesson we learned a while back is that just because you want a capitulation, doesn’t mean the market will capitulate. Just because you want capitalization doesn’t make it happen. For example, the credit market capitulates at times in 2020. Not that we wanted it, but they capitulated, so people think that just because you want capitulation, capitulation doesn’t necessarily happen. That’s why some of these models, like SIP, work because they don’t believe in capitulation and instead believe in fixed investment.

The risk is that, as you know, consensus always works normally with some problems, and the problem is that we always overrate our ability to access risk. Did we ever know there was going to be a problem called covid met in December 2019, when would I have told you that there could be a risk called covid, the answer is no so there is nothing on the horizon the fact is that the consensus can sometimes be that retail investors have interests in the nature of derivatives markets and they The risk of interest represented by the derivatives markets and the fact that it is a risk and if you look at how the Reserve Bank has taken this whole personal loan capital adequacy and I believe central banks know a lot more about the economy than you and I do that they have made this capital adequacy decision. Meaning they know that today we understand the corporate sector and we meet them the corporate sector is in a very good position. We understand government finances because data on government finances comes from time to time. I think the government has managed its finances properly. So on the retail side, there has to be something when the central bank says no. We want banks to lend less to the retail sector, so I believe there is some concern about marginal leverage in the equity market and marginal leverage through the personal loan market. I’m not leveraged, the people I know are not leveraged, and I don’t trade derivatives in compliance, which means I may not know what’s going on in this market, but the overall position, for example, in derivatives, is not a daily market short at this point.

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