Live conferences are a different way to learn and expand our consciousness, perspectives, and knowledge base on subjects which then inform our career and life decisions. I attended one such event last Friday in Mumbai and met India’s top fund managers to understand their outlook on the capital markets and opportunities for investors going forward. Here is a quick takeaway.
Economy bottoming out. GDP growth now improving. Big improvement will come in FY 2016-17. Expect 7% in FY 2016-17. Revival in cycles. Half completed projects will get finished and will start generating cash flows. Expect corporate profits to be in the range of 16%-17% in FY 2016-17. Last year it was around 11%-12%.
PE Multiples: Once growth is steady, investors have no problem giving a higher multiple. P/E will move from 14-15 to 20-21. High probability of indices moving higher in a 3 years time. The rate cut can come early next year.
During the last five years, there was ‘fear of loosing money’. Currently there is ‘fear of missing opportunities’.
One fund manager clearly explained the different investment styles. Value, Growth, Momentum, Beta and Dividend Yield. One should understand these basic concepts before choosing the equity fund.
Another top fund manager showed how an equity oriented hybrid fund’s performance has given wealth to the investor for staying invested for long term. The results are absolutely amazing and one should take the benefits of long term compounding. Investors in the long term (say 20 years) have made in excess of 20% CAGR annually. The bad news is that only 3% of the investors stay invested for more than 10 years. Patience to stay invested for long periods is a key to make wealth. He also pointed out that India’s GDP is actually doubling every 5 years.
Debt is very attractive at this point in time. It looks like this kind of opportunity comes once in 12 years. Investors should not miss this asset class.
One key behavioral issue to note is financial knowledge does not necessarily translate into action.