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Time of India
2 days ago
- Business
- Time of India
How will midcap and smallcaps perform vis-a-vis largecaps going ahead? Mahesh Patil explains
Mahesh Patil , CIO, ABSL AMC , says in the post-Covid period, mid and small-cap companies experienced higher earnings growth compared to large-caps, fueled by increased investment and sector re-evaluation. While earnings growth has converged and valuations have corrected, mid and small-caps still offer a better long-term growth outlook, potentially attracting renewed investment despite higher valuations and risk-reward. Though you believe that further rate cuts can be a little negative for the banking space in the short term, this is generally seen to be a positive move for discretionary spending. Within that, the auto turns favourable, the sector outlook, along with that the real estate sometimes gets a push. But this time, do you believe this particular thesis will hold true? Are the valuations comfortable for the stocks to take them up? Mahesh Patil: There are two parts to it. One is urban and the other is rural. Urban is more dependent on to some extent also on interest rates because a lot of urban consumers have got mortgages and with interest rates coming down that should support over there. So, yes, clearly urban consumption can see improvement if we see more rate cuts, whether it is the mortgage sector, whether it is the auto sector. But the rural economy is also very important and there are some tailwinds there on the consumption side. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like この中毒性RPGゲームが大流行中—今すぐ無料でプレイ! BuzzDaily Winners ゲームをプレイ Undo Inflation has been trending down, so the real wages are now looking much better over there. Monsoons have been good. This year the crop output is supposed to be fairly good. All these factors one would expect the rural incomes to be better this fiscal year and that could drive rural good growth. We are also seeing commentary from a few companies coming in that direction. So, given that the outlook for some of these sectors if you talk about whether it is the auto sector, currently the outlook is still weak, we are not seeing any kind of pick up but one can really hope that in the second half after the festive season there could be a pick up over there. Valuations in some of the sectors are not necessarily cheap, but they are reasonable. We have seen this in some stocks in the sector underperforming. So there is nothing really cheap but rather reasonable valuations. It is more about the delta change. If we see the trend changing, then we could see upgrades in the earning cycle and this sector can start to outperform. But I would be more constructive on some of the sectors related to the rural economy rather than urban consumption. The grain of truth here is that small and midcap stocks have rich valuations and there is no second view about it. Yet small and midcap stocks tend to outperform and continue to get inflows. Where is this entire cohort of small and midcaps headed? Mahesh Patil: In the post Covid period, the earnings growth of the midcap and smallcap companies was much higher than the largecap or the broader market and that was one of the factors. Live Events You Might Also Like: Is IT a value buy or a contra buy now? How will NBFCs fare? Mahesh Patil answers Obviously we had seen a lot of money coming into the sector and we saw a rerating of that sector also. So, it is a combination of higher earnings growth and PE multiple expansion which led to the kind of outsized returns in the small and midcap sector. In the last nine months, we have seen that earnings growth has kind of converged a bit for the midcaps, especially if you look at it compared to the largecaps, it is more or less in line, and valuations have also corrected to some extent. But they are still expensive, especially in the midcap space. Now, the question is whether the growth in this midcap and smallcap sectors, at least the outlook over there is better than the largecaps. Post the reset that we saw this year, at least on a bottom-up basis, we are seeing that in the midcap and smallcap universe, the earnings growth is slightly better than the largecap companies. If that is the case, then while the valuations are still higher, if they are able to exhibit better growth, then one can see people moving away from mid and smallcaps. That money will start to again come back into the sector and we have seen early trends of that happening. So, I would say that while the risk-reward is better in the largecap stocks because in a market correction, any kind of a risk-off globally will provide that downside, but in a three-year, five-year view, midcap and smallcap bottom-ups will possibly still in the Indian market see a better growth outlook on domestic side and end up outperforming.
Economic Times
2 days ago
- Business
- Economic Times
How will midcap and smallcaps perform vis-a-vis largecaps going ahead? Mahesh Patil explains
Mahesh Patil of ABSL AMC suggests mid and small-cap companies may see renewed investment. Despite higher valuations, their long-term growth potential remains attractive. Rate cuts could boost urban consumption, particularly in mortgages and autos. Rural economy shows promise with better real wages and good monsoons. While auto sector outlook is weak, a post-festive season pick-up is possible. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads , CIO,, says in the post-Covid period, mid and small-cap companies experienced higher earnings growth compared to large-caps, fueled by increased investment and sector re-evaluation. While earnings growth has converged and valuations have corrected, mid and small-caps still offer a better long-term growth outlook, potentially attracting renewed investment despite higher valuations and are two parts to it. One is urban and the other is rural. Urban is more dependent on to some extent also on interest rates because a lot of urban consumers have got mortgages and with interest rates coming down that should support over there. So, yes, clearly urban consumption can see improvement if we see more rate cuts, whether it is the mortgage sector, whether it is the auto sector. But the rural economy is also very important and there are some tailwinds there on the consumption has been trending down, so the real wages are now looking much better over there. Monsoons have been good. This year the crop output is supposed to be fairly good. All these factors one would expect the rural incomes to be better this fiscal year and that could drive rural good growth. We are also seeing commentary from a few companies coming in that direction. So, given that the outlook for some of these sectors if you talk about whether it is the auto sector, currently the outlook is still weak, we are not seeing any kind of pick up but one can really hope that in the second half after the festive season there could be a pick up over in some of the sectors are not necessarily cheap, but they are reasonable. We have seen this in some stocks in the sector underperforming. So there is nothing really cheap but rather reasonable valuations. It is more about the delta change. If we see the trend changing, then we could see upgrades in the earning cycle and this sector can start to outperform. But I would be more constructive on some of the sectors related to the rural economy rather than urban the post Covid period, the earnings growth of the midcap and smallcap companies was much higher than the largecap or the broader market and that was one of the we had seen a lot of money coming into the sector and we saw a rerating of that sector also. So, it is a combination of higher earnings growth and PE multiple expansion which led to the kind of outsized returns in the small and midcap sector. In the last nine months, we have seen that earnings growth has kind of converged a bit for the midcaps, especially if you look at it compared to the largecaps, it is more or less in line, and valuations have also corrected to some extent. But they are still expensive, especially in the midcap the question is whether the growth in this midcap and smallcap sectors, at least the outlook over there is better than the largecaps. Post the reset that we saw this year, at least on a bottom-up basis, we are seeing that in the midcap and smallcap universe, the earnings growth is slightly better than the largecap companies. If that is the case, then while the valuations are still higher, if they are able to exhibit better growth, then one can see people moving away from mid and smallcaps. That money will start to again come back into the sector and we have seen early trends of that I would say that while the risk-reward is better in the largecap stocks because in a market correction, any kind of a risk-off globally will provide that downside, but in a three-year, five-year view, midcap and smallcap bottom-ups will possibly still in the Indian market see a better growth outlook on domestic side and end up outperforming.
Time of India
22-05-2025
- Business
- Time of India
Fiscal health, low borrowing costs to drive growth: A Balasubramanian
"If you are age of 20, assuming you live for 100 years, 80% of your asset should be in equity. As you start progressing in age, your equity asset classes should come down and fixed income asset class should go up," says A Balasubramanian , MD & CEO, ABSL AMC. But what as per you is the ideal asset class allocation because what we are seeing is that Indian markets , of course, are finding a bit of a resilience amidst the global turmoil, other than that the gold was actually losing its shine, but once again making a comeback. So, as per you how should investors place their bet? A Balasubramanian: So, there are traditional model. My own belief is a simple traditional model easy to understand, it is more sustainable, which is nothing but 100 minus your age should be in asset in equity. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bantayan Unsold Cars In 2024 Are Almost Donated. See Price SUV Deals | Search Ads Search Now Undo If you are age of 20, assuming you live for 100 years, 80% of your asset should be in equity. As you start progressing in age, your equity asset classes should come down and fixed income asset class should go up. But at the same time, fixed income also should be looked at from the point of view of inflation against how much you earn. If the inflation is about 5%, if your interest rate is coming 5%, there is not worth keeping money in fixed income, it is worth actually putting money in equity because high inflation means somebody is taking your money, so that is the way asset allocation should be looked at. And gold as an asset class, given the fact now it has become a good asset class, silver has become asset class. So, as long as, there is a sellable value, you can go to the market, you can sell anytime, there is a price which is fixed on a daily basis. Live Events So, therefore, it becomes also one of the asset class that can be owned. So, therefore, from a broader investment point of view, 50% to 60% asset class will always be in equity and 35% to 40% asset class will be in fixed income, you need earning assets at all point of time, then actually rest 20-25% comes in the gold and other asset classes. But fortunately, the mutual fund side, as mutual funds also progress over a period of time, we also moved away from just simple product-based selling to a solution-based selling. So, today if you look at the whole hybrid asset classes such as balanced advantage fund or multi-allocation fund or multi-cap fund, all of them actually generally drives the nature of asset associations you invest in equity depending upon where the market is, higher equity depending upon the bullish view that you have on market and lower equity depending upon how bearish view you have on the market. These dynamic asset association which happens in balanced advantage fund, a dynamic asset association happens in multi-cap fund moving between largecap to midcap to smallcap and also having gold in multi-asset allocation fund. So, such kind of product actually gives the natural solution to the investors. You do not need to break your head and for you to do a planning of how much should go in equity, how much should go in debt that responsibility now can be given to the money managers by choosing these kind of funds, that is the beauty which mutual fund also has created over a period of time to remove the headache of investors in focusing asset associations on their own rather than choose a product which also serves equal amount of similar purpose. Certainly, but the last time we connected with you, you were of the view that the uncertainty in the markets is towards the fag end. What is your current view now and also give us some sense that from where do you believe the big trigger for the market will trickle in because we are getting to hear a lot of news on the tariff, the deals that are through, and even now the bond markets are giving us some signals. Are you concerned about that? A Balasubramanian: So, the way, I think when the tariff was being announced, from US point of view, it was supposed to be the one of the best decisions one could have expected in the sense it supposed to bring in trillion dollar by way of tariff collection, supposed to bring in trillion dollar by way of reduction in the freebies that US government has been giving to the local institutions and research subsidies and so on and so forth. So this now is getting diluted and now once again the shift is getting focused towards rest of us from an investing point of view. that is why the bond market actually reflects the fiscal correction which was supposed to happen, did not happen, would not happen as quickly as possible plus rating downgrade that happened recently on the basis of tariff uncertainty, inflation rising, slowdown in economy and so on and so forth. So, this uncertainty now getting back shifted to US market. At the end of the day, one should also remember despite interest rate being high in the US market, companies are doing very well. See, the company earnings are getting now better. Therefore, there is a disconnect between the bond market and equity market. Even I am very surprised whenever the yields are high, ideally speaking the equity market should actually correct. But this time it is not happening because the seven or eight stocks which are actually driving the US markets, their earnings have been pretty good, they are actually getting growth not just from US alone, they are getting growth from the international market. I assume a company like Microsoft would get large pool of the revenue coming from rest of us. The world is becoming a consumer of US products. Therefore, there is a bit of disconnect. Therefore, you come to a conclusion that interest rates have gone up, therefore, it is negative for equity, that is why this uncertainty will remain. But having said that, economies like India and the whole tariff thing, we seems to have managing it quite well and the impact on India is going to be relatively less and Indian economy is doing well. First time I am seeing in the last number of years, fiscal we are in a sweet spot. Indian fiscal is in sweet spot. Tax collections have been very good. GST collections have been roaring. If the companies are not doing well, if the consumers are not buying anything, why would GST collections will go up? Therefore, there is an implicit impact that we should see on the momentum and the earnings are coming back as we move forward and India is the only country where interest rates have been cut. So, the interest rate already have been cut by about 20 basis points. Today one-year and 10-year yields if you look at, it is about 6.2 for 10-year bond yields, so which essentially mean for companies for borrowing in the country is at very, very cheaper rates very-very high. I did meet one of the very small SME companies, which has got less than 40 crore turnover. I just casually asked him what is your cost of borrowing and he said my cost of borrowing is 8.5%. A company which has about 50 crore turnover and 8.5% he is getting money from the bank, which essentially means his profit could be higher and which otherwise he used to have earlier by way of high interest rate regime, paying high interest rate for him running the business that has now come down, therefore his margin will be higher. He will be able to create more employment. From 50 crore, he can actually aim to become 100 crores which is an aspirational change that has come at the mid-sized companies and also the cost of borrowing. The bigger plus point for India is actually the cost of capital in India has come down so much and companies will be able to deliver better numbers as you move forward. So, if rates go down, that means somebody will take a haircut, either an NBFC will take a haircut or a bank will take a haircut or the unorganised lender will take a haircut. So, while interest rates going down, it is great news for corporate, it is great news for consumers. Who will take the haircut? A Balasubramanian: So, there is no haircut. It is about how much money you make. We are keeping in mind the band in which you must lend. So, after adjusting your cost, so you keep a NIM of say 3% to 5% or 6-7% which is which you lend. So, therefore, ultimately these businesses are driven by the NIMs and other good thing on this sector is absolute profit that they make over a period of time, I think they will keep rising. So, balance sheet size increasing, your top line is increasing, therefore your bottom line is increasing. So, necessarily the interest is coming down, only the period where interest rate could happens, you are not able to pass on the drop in interest rates, even on the deposit holders it takes some time, so there is a transition time of about three to six months you can say, on transmission of interest rate both on the lending side as well as on the deposit side, but otherwise this sector will remain one of the big sectors given the fact that they are proxy to the economy and they are the one creating businesses, therefore they will remain the sector to watch out for even going forward.
Time of India
22-05-2025
- Business
- Time of India
Markets move fast, but compounding moves faster: A Balasubramanian on why the next decade will be transformational
"So, if you look back in my own, in the investment style, maybe at any point of time you take a conservative call, therefore you remain underinvested in assets which has got a long-term compounding from a wealth creation point of view. Wealth is not the only one that one should target," says A Balasubramanian, MD & CEO, ABSL AMC. So, what was the Sensex when you started? A Balasubramanian: Somewhere close to about 1,800, 2,000. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Brought to you by Undo Sensex was 1,000. A Balasubramanian: Sensex was 1,000. There was no Nifty . A Balasubramanian: There was no Nifty. I think Nifty came 95-96 after the nse got opened up. It was only Sensex. We have seen only BSE and and grey market. So, when you look back and you say that okay if the Sensex has gone up from 1,000 when you have tracked to 80,000, what is that one thing you wanted to do differently when you look back and analyse your career or your investment style, I mean what is it one thing you said oh, I wish I would have done this differently, I would have created more wealth for my unit holders or created more wealth for myself and my family. A Balasubramanian: Of course, it is about the deep understanding of how the compounding works. See, most of us when you think about investing, we always underestimate the compounding theory and so, I just give you a simple example, that when I started my career, so I used to also believe in creating a long-term investing through the life insurance policy, so that is how we all started, then we must have 30-year policy for your daughter and son for education without understanding the compounding impact on that relatively lower as against the market investing. Live Events So, this was a lack of understanding of how it can work. So, if you look back in my own, in the investment style, maybe at any point of time you take a conservative call, therefore you remain underinvested in assets which has got a long-term compounding from a wealth creation point of view. Wealth is not the only one that one should target. It is all about building the future, what do you call security, which everyone has to do from a point of view of having the right amount of wealth and for various purposes which will include giving back, which will include making the assets available for the families and so on and so forth, spending, and as well as for giving. So, for which the market provided an opportunity. Therefore, staying convinced on power of compounding is something I would say one of the area where we keep debating, keep discussing that is why you look at a 1,000 index and 80,000 index, it is nothing but as the economy grows, of course, market has to reflect that in terms of market cap. I always tell my friends and folks, who ask me that okay what is the biggest mistake I have personally done. I said I started preaching power of compounding in my 20s, but I started implementing in my 30s. I wish I would have started in my 20s and that 10 year is what I feel and in my 40s now if I would have that 10-year advantage, my 50s and my 60s would have been very different. A Balasubramanian: As I always said, it is a better late than never and that is the beauty. See, even today we are still talking about $10 trillion economy and Viksit Bharat 2047 which essentially mean $30 billion economy, which means maybe the next 10 years will be faster. As I always believed in telecom industries. China probably would have taken 35 years to implement telecom revolution, whereas India took maybe about 10 years to bring in telecom revolutions. So, the world is moving faster, compounding is becoming faster. The more and more companies are coming. How would you describe the current leg of the market? In Jan, everybody wanted to sell all asset classes and move back into dollar. Just sell everything and go back to dollar. Now it is the reverse. Suddenly everybody wants to sell all dollar assets and move to other assets. Bitcoin is going higher. Emerging market flows are coming back. Six months, I love you dollar to long live dollar to we do not want to own dollar assets. Why the world is changing so rapidly within not even six months, actually four months. A Balasubramanian: I think that the way I see is the number of people who are participating in the market have been rising and each of the segment of the market players have got towards asset classes differently. The traditional investors, they do look at earnings and therefore they continue to invest in equity, building businesses, and seeing the earnings coming out of the building businesses, generating revenue, generating employment, and generating a profit after paying taxes and so on and so forth that is actually the way any business model is built. But other asset classes, as we always used to say gold has got only storage value, but at the same time it is a hedge against dollar, hedge against inflation, and there are set of people who also loves these kind of asset classes because though they not have the industrial productions value, but there is a demand-supply situation comes in. There is a demand-supply situations drive those prices. So, therefore, these asset classes will remain. But ultimately in the long run what sustains actually the asset classes which is driven by the earnings and basis you can apply certain kind of assumptions in terms of the terminal value of these companies and so on and so forth. So, wherever those clarity is not there, those asset class will always remain a speculative asset class. But the question is how much of the speculative asset classes one wants to own in the portfolio and then how you want to shift your asset class from one to other is something will always remain a big question mark, not in today's world, even going forward this will remain. This will be one of the challenging area even for the people of investing in the market, how to avoid this in asset classes or how much to own or not to own these decisions will always remain critical, but given the fact the whole, the set of people who are investing in the market have got different kind of mindset to deal with these kind of classes, We have to watchful. We have to watch it, at the same time remain focused on the allocations.
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Business Standard
29-04-2025
- Business
- Business Standard
Aditya Birla Sun Life AMC gains 7% on steady Q4 numbers
Aditya Birla Sun Life AMC share price today: Shares of Aditya Birla Sun Life AMC gained 7 per cent to ₹685.80 on the BSE in Tuesday's intra-day trade after it reported a steady set of March 2025 quarter (Q4FY25) results. At 02:52 PM, the stock was trading 5 per cent higher at ₹673, as compared to a 0.14 per cent rise in the BSE Sensex. Steady Q4 financial performance Aditya Birla Sun Life AMC on Monday reported a 9 per cent increase in net profit to ₹228.1 crore for Q4FY25. The company had posted a net profit of ₹208.4 crore in the same quarter preceding fiscal. On a quarter-on-quarter (Q-o-Q) basis, net profit was up 2 per cent from ₹224.5 crore in Q3FY25. Other income recovered from ₹38 crore to ₹72 crore Q-o-Q, aided by gains in debt funds owing to a fall in yields. Revenue from operations surged by 17 per cent to ₹429 crore during the quarter under review from ₹365.6 crore in the year-ago period. Revenue was down 4 per cent Q-o-Q from ₹445.1 crore in the previous quarter. Revenue yield was down 2 bps Q-o-Q at 42 bps, mainly owing to a decline in equity mix proportion in asset under management (AUM). Earnings before interest, taxes, depreciation and amortisation (Ebitda) margin declined 475 bps Q-o-Q to 56.9 per cent as topline witnessed de-growth while expenses were on the higher side. Market volatility led to a temporary dip in SIP flows. However, management remains confident that SIP momentum will recover as fund performance continues to improve (85 per cent of funds are meeting the benchmarks). Brokerage view – ICICI Securities The pace of the fall in market share trend that has been seen for quite a few quarters looks to have been arrested. The company is making efforts to improve on the equity side by changing internal processes, leadership and more active distributor engagement. The stock tends to get a relatively lower valuation vs peers owing to its historical subdued performance. Going ahead, its market share performance, especially on the equity side, remains a key factor to watch out. Brokerage view – Motilal Oswal Financial Services The company's inflows into equity funds strengthened, driven by improved investment performance and a focused on-ground sales push. During the quarter, the company also organised an exclusive event to deepen relationships with key distribution partners. Market share across segments is expected to improve with an improving fund performance (~85 per cent of funds are beating benchmarks). The expansion of the alternate and offshore business, strong fund performance, market share improvement, and rebound in SIP flows will be beneficial for the company's profitability. About Aditya Birla Sun Life AMC Aditya Birla Sun Life AMC Limited (ABSLAMC) was incorporated in the year 1994. Aditya Birla Capital Limited and Sun Life (India) AMC Investments Inc. are the promoters and major shareholders of the Company. ABSLAMC is primarily the investment manager of Aditya Birla Sun Life Mutual Fund, a registered trust under the Indian Trusts Act, 1882. ABSLAMC also operates multiple alternate strategies, including Portfolio Management Services, Real Estate Investments and Alternative Investment Funds. ABSLAMC is one of the leading asset managers in India, servicing around 10.6 million investor folios with a pan India presence across 300+ locations and overall AUM of ₹4.05 trillion for the quarter ending March 31, 2025 under its suite of Mutual Fund (excluding domestic FoFs), Portfolio Management Services, Alternative Investment Funds, Offshore and Real Estate offerings.
