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but the question to Sanjay par who's got
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oodles and oodles of experience he's the
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founder and C of s asset managers but
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has served as a CIO and fund manager at
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multiple houses for a really long period
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of time is how does this pain feel
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because sanj thank you so much for
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taking the time out and speaking to us
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today but I and we will talk about how
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you've modeled your current portfolio as
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well but I want to talk to you about the
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cycle right now right because for a lot
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of people this is new a lot of people
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who've come in post 2020 this is brand
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new because yes they've seen
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intermittent pain in the last 4 years
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but this is that that throbbing pain
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which is not even dull and it seems like
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it's not going to go away I'm getting
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countless messages ask me when will this
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end now you've seen various Cycles like
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these right sanj how does this
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feel yeah so you know it's again back to
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Equanimity sanity basic rules we back to
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Basics uh you know so earnings growth
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valuation they do matter um all
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throughout and uh uh we believe that at
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least in the larger caps uh there have
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been earnings downgrade you just uh you
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know in the previous clip you explained
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your team explained that earnings for
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larger caps Nifty would be more like
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1200 and then we move to 37 where we
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will be more like
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1350 uh this year growth will be taid
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it's known q1 Q2 was weak Q3 will also
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be weak as we complete the session of
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the quarterly uh but I think a lot of it
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is in the price now so if you want to
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take a 11 15 to 18 month view I think um
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and we've written that in our note also
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that we think the price risk in the
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larger caps is gone uh there could be a
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time risk uh the near term weakness we
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believe is led by Dollar strengthening
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and the rupe weakness uh RBI is doing a
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lot to defend rupee and also the rupee
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that gets sucked out because of that
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they're again pushing it in the through
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omos which you saw yesterday of two and
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half lakh cres further infusion because
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part of it when you defend rupee you
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have to suck out the liquidity which you
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again giving it back so the best part is
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now RBI stroke government uh clearly is
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aware that we need to you know Market
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side to come back to I mean it's getting
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overdone is what I think uh they also
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are aware and that's coming through in
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actions earlier in budget and then now
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in uh monetary policy and the liquidity
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provision that they're doing so I think
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uh it's a matter of time by and we would
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bottom up very soon is what I think in
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Nifty in the mid and small cap um you
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know it is going to be because you have
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a 6,000 stocks you know so we believe
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that again the principles of growth at
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reasonable price where valuations are
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reasonable there are sanity growth is re
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I mean growth scale is not high there
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you will see you know some of it slowly
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bottoming out today everything is with
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the same paint of brush everything is
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getting rogered but slowly and steadily
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sanity will prevail and the stocks which
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are reasonably valued at reasonable
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growth uh will bounce back um but where
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there is frauds in valuation and
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earnings are disappointing
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because of over ownership you may see
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pain but sanj sanj I have a question
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have a fundamental question here that
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yes earnings are disappointing but in
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some sense this doesn't seem like a
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structural slowdown right wherein for
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the next four quarters earnings will
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likely be
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disappointing person after person
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Economist after Economist is talking
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about how there was temporary liquidity
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tightness there were two quarters
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wherein because of monsoon and because
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of Elections there was a pullback which
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might reverse maybe we'll see some signs
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of that in quarter 4 and quarter 1 some
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more signs of that as well right so
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hopefully earnings will revive relative
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to what we've seen in Q2 and Q3 right so
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my question therefore is you've been at
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the Forefront saying that large caps May
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safety and midcap small caps small caps
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are now down 21% from the peak yes they
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are yes maybe expensive but a lot less
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expensive than what they were is the fro
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near the close or do you believe there
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is still a large correction left in
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small caps yeah so NE let's take I not
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take go to a stock let's say one stock
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had an X earnings growth 15 to 18% but
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and the character of the business was
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great it moved from 30 to 50 times now
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when it moved from 30 to 15 times and
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let's say the growth is 13 to 15% and
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some disappointment happens now it's
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back to 30 times now is that 30 times
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still cheap I don't think so uh some of
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these EMS companies I don't want to get
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into names because you don't own them uh
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but they have still at 4050 times for
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growth where they're disappointed and
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the management itself is telling them
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that my two-year growth is going to be X
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after that there are 45 times after the
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fall so so I think somewhere where there
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is fraud or the visible earnings are not
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there we still have to be careful
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somewhere let's say a midsize Bank a
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Regional Bank with good Ro Roes um doing
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16% Roe was at8 it's gone to 7 it's
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actually done better it's outperformed
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it's a small cap stock and will it go
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bad I don't think so you know so it will
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but all of them have reacted some of
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them are 10 some of them 20 some of them
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40 some of them 60 so my point is that
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it'll bring back to earnings growth
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reasonable valuation and for sure the
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froy valuation of 40 50 60 times still
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there can be pain is what I think
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because there are a lot lot more there
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in those valuations today okay so the
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question sanj the question is this
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therefore that let's assume that the
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pack at large because of redemptions
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because of otherwise I mean s narin's
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comments might have uh you know set the
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cat amongst the pigeons maybe small cap
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a funds are seeing Redemption pressures
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though radika Gupta was sing us that
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they haven't quite seen that per se but
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let's assume that is happening at some
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AMCs and there is some withdrawal
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pressure Etc there are
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some stocks right and a large number of
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stocks maybe between the universe of 251
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to
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6,000 yes where the valuations are not
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froy where the growth rates are decent
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yes uh now my question is will they also
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get punished in the small cap Carnage or
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do you think the market will now start
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differentiating between small caps and
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midcaps which are showing promise of
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growth because a lot of new sectors are
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only there in the midcap and the small
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cap space they are unfortunately not
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there in the top 100 yeah no you're
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right so I think um I mean some of my
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senior colleagues are very very I mean I
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work with them I respect them a lot but
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I think we can't paint all of them with
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the same brush um there will be a
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distinction between men and boys and you
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know quality at any price is certainly
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scary according to me you could have a
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great model a great company doing great
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uh you know um I mean certainly doing a
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great work around but if the valuation
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is discomforting you saw some of the
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best names in the e-commerce 30 40%
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lower so I think uh you know it will
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always has been which you started with
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looking at Cycles it's always back to
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basics of earnings growth valuation and
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reasonable valuation and that we will
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see even in this cycle so so I think uh
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you know there are pockets of reasonable
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valuation after the fall in small and
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midcaps uh but all of them normally in
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across Cycles when they fall all of them
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fall some of them will fall 10% 20% some
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of them 50 60% so you know we all like
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even in my funds what bid cap small cap
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small caps I have they also got they
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also fell right I'll always feel they
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should not fall but it doesn't happen
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that so I think now we'll come to you
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know fundamentals and the opportunity is
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there I think you're right that there
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are various good businesses in small and
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midcaps uh and we will have to hunt more
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dig more and get with a larger higher
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margin of safety I the margin safety
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principle was forgotten in the rise
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which will now come back yeah no that's
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a fair point and maybe the market
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texture now gives you the luxury uh to
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research properly and not necessarily
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buy the stock today because it's going
00:09:02
to go up you'll get a you'll probably
00:09:04
get time to buy my question to you now
00:09:06
sanj is this what is the portfolio
00:09:08
strategy that you've adopted in your
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funds uh for you to De deliver the
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perform because I think you've done
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really really well uh you know in in
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these last 12 to 24 months and is are
00:09:19
you changing that a little bit going
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ahead because it would have been prudent
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to be maybe even 100% large caps uh 6
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months ago right now that the Falls have
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happened what is the ideal portfolio
00:09:31
construct San according to you from now
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on for the next 12 months yeah so you
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know our framework from day one and when
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midc small C we ruling our framework and
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mandate was we'll have at least 70%
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large cap at least okay and in mid small
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C we will go if we see that the price
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value Divergence is high and we spelled
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out that they should ideally double in 3
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to four years but beyond four years it's
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almost like Untouchable for us so that
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discipline helped us over last 2 and a
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half years we last one and a half month
00:10:01
back we reduced small cap got larger
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caps because they actually were very
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reasonable and luckily you know we were
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early to have reduced but we still have
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small caps and mid caps so today our
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positioning is 75% is large caps we have
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around 5% cash uh 5% plus midcaps and
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the rest is small caps and in midcaps
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you know now indust in bank is also
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classified as midcap so if you take that
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we are at least at 79 80% into large cap
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so we are fine from
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here you know we still feel larger caps
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you have enough opportunities now there
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are enough places where the valuations
00:10:42
are really reasonable now not the entire
00:10:45
Nifty but at least 7 8 10 stocks where
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or maybe more which look really
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reasonable you need to now do your
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shopping very because all lot of them
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are attractive now so that's where our
00:10:57
Focus will be and in Middle small cap
00:11:00
will'll be very selective and if a
00:11:02
threshold of you know the filtering
00:11:04
criteria will will further increase and
00:11:07
if we feel that there is some
00:11:08
opportunity we will actually do a bottom
00:11:10
up there and be open to
00:11:14
it got it okay Sanjay I just wonder
00:11:18
because you are so connected in the
00:11:19
market as well have you heard from your
00:11:22
cohorts of people who run asset man the
00:11:26
mutual funds that there are Redemption
00:11:29
now starting to seen be seen in midcap
00:11:32
and small cap funds because we tried to
00:11:33
do our Channel checks I think we've
00:11:35
gotten equal measures of yes and a no
00:11:38
with more a no that thus far it hasn't
00:11:41
been seen but I'm just trying to put two
00:11:42
and two together that s Narin speaks
00:11:44
there's some bit of fear around what
00:11:46
could happen to midcap small cap funds
00:11:48
and the last 3 4 days or 3 days at least
00:11:51
the small cap space has gotten butchered
00:11:53
literally butchered right are you are
00:11:55
you hearing from people that there are
00:11:57
redemptions at the midcap and small cap
00:12:01
actually you know I'm also not totally
00:12:05
wellers with what's happening because
00:12:07
twoo shortterm if they faced but
00:12:09
generally I tell you the behavior of
00:12:12
retail if there are hnis they in the
00:12:15
funds they may be a family office they
00:12:17
may behave separately but retail by and
00:12:20
large after Big Falls they pause they
00:12:23
don't rush up and panic sell they are
00:12:26
actually the behavior has been better
00:12:28
but I really would know what not know
00:12:30
that if last 3 4 days there have been
00:12:32
redemptions but I genuinely believe that
00:12:35
uh you know I mean sip discontinuation
00:12:38
whether it happen or no um I'm not so
00:12:41
clear whether how would they behave in
00:12:43
Middle small caps on sips you know I I
00:12:46
genely Fair call Fair call sanj sanj
00:12:49
really appreciate you taking the time
00:12:50
out and joining us today uh thanks for
00:12:52
taking the time out and giving us your
00:12:54
thoughts really appreciate my pleasure
00:12:56
right um
