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Time of India
14-07-2025
- Business
- Time of India
Market very delicately poised; any bad news and we run the risk of downside: Aashish Somaiyaa
Aashish Somaiyaa , CEO, WhiteOak Capital AMC , says India's domestic economic condition is currently better than last year but external macro factors are preventing any significant upside. The market is delicately balanced, vulnerable to negative news. Investor behavior remains consistent. Net inflows decreased when the market dropped to 22,000. Confidence returned as the market reached new highs. Enthusiasm at lower levels would have been ideal. Somaiyaa also says stock picking has become more effective recently after a period dominated by macro trends. Domestic micro factors are expected to improve, but external factors like the US economy, tariffs, and geopolitics create uncertainty and may limit potential gains. What is your view on the market texture as we are seeing a lot of volatility contingent scenarios and uncertainties coming from the globe front? At the same time, the latest AMFI data show that the conviction of the market participants in the equity markets is still intact. Aashish Somaiyaa: Yes, the market is a bit delicately poised because it has not been going anywhere for months. September '24 onwards, we have been range bound, that is where we made the last peak; a couple of months earlier, we went down below 22,000 and obviously we have just been going nowhere. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo The way things are stacked up, as far as domestic economic conditions are concerned, we are doing better than probably a year back at the same time. That maybe is giving some downside protection and the external macro is preventing any upside. So, on balance, we are very delicately poised, any bad news and we run the risk of downside. As far as flows are concerned, that habit does not seem to be changing because two-three months back when we went down to 22,000, there was a reduction in net inflows. We saw discussions about stoppage of SIPs and in June, when we started making new highs, the confidence seems to have been restored so that the basic behavioural psychology does not seem to change. It would have been great to see so much enthusiasm at 22,000, but yes, that is how things have been. What will take the markets out of this range? Could it be global news, could it be something on the earnings front because right now there is nothing on the horizon which will generate fear or generate upside momentum? Aashish Somaiyaa: Yes, that is why I stuck my neck out and said that there is more risk for downside because when generally we say when there is no news, it is good news but not necessarily so for the market because if there is any surprise lurking around the corner, then we are poised for risk. Live Events You Might Also Like: Nifty headed to 28,000? Abhishek Banerjee on global risks, rupee, and sector bets As for the earnings, there has been some improved trajectory, at least what we saw on 31st March and 30th June. Obviously we are just seeing the numbers. In March there were some positives in the smallcaps and midcaps or when we look at the broader earnings rather than just the front line, because it always starts with it and then spreads out. As we go along, maybe the earnings trajectory needs to continue. Secondly, as far as the external environment is concerned, when the trade deals are announced and if there is any positive news on that or maybe the earnings, then maybe we break out into a new area. If it continues like this, then I am afraid that eventually people will lose momentum. With respect to the earnings, help us understand any sector you are building your hopes on at this point in time because we have seen IT major TCS disappoint and other stocks are reacting to that. Which are the other sectors that you are building your hopes on? Aashish Somaiyaa: There are no clear sectoral bets. When the March quarter result season ended and by the time we went into May, the realisation came about that if you look at the broader performance across midcaps and smallcaps, on balance, that turned out to be the positive. This time around, if we get the trajectory to be broad, if we find a broadening in terms of the earnings, that will be the positive thing to look at, and not necessarily betting on any sector. We generally never bet on sectors but right now I am finding our portfolios are fully focused on bottom-up and I do not find very many. If I benchmark with the BSE 500, I do not find very many stark underweights or overweights as far as our team is concerned and we generally manage portfolios which are reasonably balanced. Yes, we do have underweights and overweights. Right now, we are not actually sticking out heavily into any sector really. The portfolios are reasonably balanced. It is only the bottom-up that we are watching for and that is why I said that if what began in March continues, it will be great rather than worrying about any one sector. You Might Also Like: US Stock Market outlook: S&P 500, Dow Jones, Nasdaq projections made by experts If that is the game, then tell us about the benchmarks versus the broader markets. It is always a debate whether to stick with the benchmarks or shift to the broader markets. Last quarter, Nifty 50 companies grew only 3.5% while the next 450 companies grew over 20%. So, how should the market participants decide and draw their portfolios? Aashish Somaiyaa: That is precisely what I was alluding to. If I have to name themes, the first is that the BSE 500 is what we generally benchmark with. Yes, of course, we manage a largecap fund where the top 100 is our benchmark, but by and large, whether it is Flexicap, whether it is Quality, Special Opportunities, Large and Mid, for most of our funds, the benchmark is the BSE 500. Even for our PMS AIF, BSE 500 is the index to watch. From that perspective, where we are slightly overweight would be themes related to industrials and manufacturing. But there again, more of the midcaps and smallcaps. We are overweight on consumer discretionary. Financials in totality we may not be overweight vis-à-vis BSE 500, but the composition is very different. Apart from the banks and the usual suspects, it is more NBFCs and capital market companies. The last one where I find significant overweight is healthcare. These are the broad areas where one finds more ideas and more overweights, but yes, I hope that the breadth is what we can get. On one side, there is good macro, REITSs, liquidity. The second side is macro which is expensive. When do you see macro deteriorating or micro becoming better? Aashish Somaiyaa: Counterintuitively, to be honest, the last six to nine months is good for people like us because stock picking is working. Personally I found that 2023 and the first half of 2024 was difficult because it was all hot hands . – whether you are in smallcap or not, whether you are in PSUs or not, whether you are in railway, infrastructure, defence. So, either you are in or you are out. It is the macro, the top down which really determines. That is the environment we were in in 2023 and early part of 2024. The last eight-nine months have been great for stock pickers because the alpha is coming back very sharply and that is why I have been harping on the breadth and the bottom up. Coming to your question, I feel that the case for the domestic micro continuing to improve is probably what one is watching out for and that is highly likely. But if you see the externals, the upside gets capped there because of two or three reasons. One is that we are going through a time correction. One year back, where we were on our micro and our fundamentals were not looking encouraging. Only in the last six months, has there been a change of RBI policy, a change of liquidity, and stabilisation of the rupee. You Might Also Like: Q1 results boom: 11 companies set to double profits with up to 2,500% surge. Own any? A lot of things have started working for us only in the last six months. There is a high probability of domestic conditions improving, but the external macro is completely unpredictable with the US economy, the tariffs, as well as the geopolitics. There are many hot spots in the world which are lurking to cause escalations and turbulence. I am afraid it is going to be boring for some more time, that is my sense.
Time of India
10-05-2025
- Business
- Time of India
From BFSI to consumer brands: WhiteOak's Trupti Agrawal on hunting for durable alphas
Both BFSI and consumer discretionary sectors are very heterogenous with a strong runway for growth but differing near term growth dynamics, says Trupti Agrawal, Fund Manager at WhiteOak Capital AMC . "We seek to maintain a balanced portfolio without over-emphasizing on top-down themes," she says. Edited excerpts from a chat: BFSI has had its fair share of drama in recent years—NPAs, fintech disruptions, rate cycles. What's your current framework for identifying winners in this space? The investment philosophy is that outsized returns are earned over time by investing in great businesses at attractive values. It is a stock selection-based approach of investing in businesses rather than betting on macro. The two critical elements of this philosophy are business and valuation. We want to invest in the companies that present the most compelling combinations of these two elements. To be considered great a business should possess three attributes: (a) superior returns on incremental capital, (b) scalable, (c) well managed in terms of execution and governance. Every industry goes through cycles. However, it is only the well-run and well-managed companies which can generate sustainable growth. In general, as in any sector, there is a long runway for growth, but execution is the key. That is why a critical 360-degree evaluation is essential especially within mid and small cap financials. Governance assessment is typically the starting point of our analysis. Live Events With rate cuts happening and inflation tapering, how are you positioning your BFSI bets—leaning more toward lenders, insurers, or fintech hybrids? A stable macro always bodes well for the financial services sector. However, BFSI is a very heterogeneous sector with different sub-segments having different drivers; for example, fintechs or intermediaries and distributors may be less impacted by monetary policy than traditional banks or NBFCs. In general, we believe that financial services is a diversified sector which offers numerous opportunities for alpha generation from a bottom-up perspective. Apart from well-run private sector banks which continue to gain market share there are NBFCs with strong underwriting practices operating in niches. Insurance companies, asset management and fintechs also present a diversified set of opportunities, each with a long runway for growth given the relative under-penetration of financial products and services in India. Within the consumer discretionary sector, are you seeing signs of fatigue or a fresh wave of premiumisation? India is projected to be the fastest growing major economy in the world and as per estimates by leading global agencies, India will be the third largest economy by 2030. By the end of this decade, India is projected to have a per capita income of US$5,000. A potential multi-decade growth opportunity is unfolding as per capita incomes rise creating inflection points for various categories where India is at the lower end of the consumption curve. Driven by the lowest data costs globally, the internet has democratised aspirations across 200mn+ households which are at an early stage of adoption of many discretionary goods. The Indian consumer is increasingly more aspirational and expressive. The consumption economy is having a pyramid structure - at every level, there are new entrants (households) who are moving up the consumption ladder every three to five years. It is often said that 'One man's staple can be another's discretionary!'. Thus, premiumisation is not a quarterly or annual trend but is more structural in nature. At a company level, the realisations may not be commensurately visible from quarter to quarter because of value engineering. In time, this trend is reflected in higher profit margins. Having said that, while there has been a recent slowdown in consumption at a broader level, near term trends do not suggest any slowdown in the path to premiumisation. Companies continue to invest in innovation and focus on the premium/contemporary segment. How do you balance valuation froth with structural opportunity, especially in consumer-facing businesses where narratives often get ahead of numbers? At WhiteOak when we think about valuations, we do not use PE or EV/EBITDA multiples, because such metrics can be very misleading and lead to wrong decisions. Instead, we rely on our proprietary OpcoFinco™ valuation framework, built on principles of economic cash flows and returns on incremental invested capital that is integral to the disciplined research process. The basic framework remains the same; tools, techniques, and lenses differ for different sectors. When we evaluate consumer companies, the framework consists of many variables including unit economics, nature of structural competitive advantage, agility, and adjacencies. Going by conventional multiples, if a sector seems to be richly valued at an aggregate level there could be significant disparities within the sector, which we try to exploit. It is important not to get too caught up in themes but to evaluate every company basis the management's execution capability. Many team members also have global investing experience, which brings about a unique pattern recognition perspective to investing in Indian companies, especially the new emerging businesses. When it comes to consumer companies, how big is the threat for established players from D2C players which seem to be the favourites on quick commerce platforms and from selling of own labels by the likes of Reliance Retail? Most D2C brands target niche markets ignored by established brands, particularly at the high end where customers are willing to pay more. This limits their market size, making it hard for many to scale. The competition is fierce as multiple brands aim for the same market space. Some gain market share at the top end of the pyramid through quick commerce channels, while established brands dominate the lower end with strong branding and distribution. So far, private labels pose a threat but haven't gained much traction yet, though this could change. If you had to pick one segment within BFSI and one within consumer discretionary to back through FY26, what would it be and why? Both of these sectors are very heterogenous with a strong runway for growth but differing near term growth dynamics. We seek to maintain a balanced portfolio without over-emphasizing on top-down themes. From a more longer-term perspective, besides the growth multiplier that the financial services industry would enjoy in a developing economy like ours, the significant under penetration of financial products like credit, insurance and investments makes financial services a multi-decadal and structural theme in the Indian context. The portfolio has a mix of names from private banks, NBFCs, custodians, insurance companies, asset managers, and fintechs. Consumer Discretionary is a diverse sector. Apart from demographics and rising income levels which are reasonably well understood, a higher female labour force participation is revolutionising the demand landscape silently. It is difficult to cherry pick any one category. What is important is to have a replicable investment framework which can be applied across segments to identify winners. ( Disclaimer : Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
