S Naren sees better valuations, but no outsized gains. Check his 10 pieces of advice
1/9
Market warning sign
Veteran fund manager Sankaran Naren earlier flagged market excesses and warned on silver; now he turns positive on equities but cautions against post-2020-like returns while stressing macro-driven investing. Here are 10 things Naren said for investors, as reported by ETWealth.
2/9
Follow a calibrated approach
Sankaran Naren says this is a good time to start SIPs as markets are not very expensive and valuations have turned more favourable. “This is a good time to initiate SIPs. But do not expect post-2020 returns” Geopolitical risks still remain. So while valuations are more comfortable, triggers for strong market returns will depend on how global events evolve,” Naren said.
3/9
Immediate action needed
We recommended that investors can start systematic transfer plans (STPs) into equity and can consider deploying one tranche of their investment immediately.
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4/9
Sectors to bet on now
Naren said the AMC is positive on export-driven sectors like IT and pharma; in energy, refining, upstream and power look well-placed in the current global environment.
5/9
Take on mid caps
Midcaps remain expensive as strong SIP inflows and limited stock supply have prevented meaningful correction, prompting a cautious view on the segment. Midcaps continue to face valuation concerns driven by liquidity and sustained inflows despite a limited universe.
6/9
How does he see small caps?
Small caps have seen supply through IPOs, QIPs and new listings, leading to a correction and creating selective stock-picking opportunities, though valuations are not very cheap. Overall, the risk-reward between large and small caps appears similar, with lower risk in large caps.
7/9
Time to focus on value investing?
Shorter cycles have helped because triggers play out faster due to strong institutional flows into equities. Earlier (1995-2004), value unlocking took much longer due to limited flows. Today, triggers can play out faster, but we remain mindful that slower periods can return as markets move in phases.
8/9
Valuations turn favourable
From an investor perspective, history shows that when our equity valuation index (EVI) moves into the green zone, the probability of long-term profit improves compared to the neutral or red zones.
9/9
Investing myth
The risk in equities is highest at the bottom. In reality, risk is usually highest at the top and lowest at the bottom. Risk is often inversely related to past returns.