Mr. Vihang Naik
Portfolio Manager – Equity - at L&T Investment Management
Vihang Naik is fund manager at L&T Investment Management with an overall experience of 11 years in equity research. He manages L&T Long Term Advantage Fund, L&T Emerging Opportunities Fund and co-manages L&T Midcap Fund.Prior to this, he was a Research Analyst with MF Global Sify Securities. His previous assignments include research analyst in Motilal Oswal Securities and SBI Cap Limited. Vihang is a Certified Financial Analyst and a Bachelor of Management Studies from Mumbai University.
Q . How do you rate the Union Budget? What big picture do you see?
Answer :We can summarise the Budget 2022 in one line - "No bad news is good news". Priority is on infra development which has a better multiplier effect on the economy over welfare/populist measures. This should be seen in the light of many state elections lined up in CY22. Productivity enhancement, Digital push, Energy transition and climate action are the key pillars from a big picture standpoint where the government is committed to put forth a lot of measures.
Q . What have been the big takeaways from the Union Budget? Can you mention 3 big things you like?
Answer :Our 3 key takeaways from the budget:
- More focus on infra development in a holistic manner through Gatishakti which combines all the seven engines of roads, railways, ports, airports, mass transport, waterways and logistics infrastructure.
- ECLGS scheme extension - This is critical for the informal sector to recover post covid.
- Push towards divestment with realistic assumptions.
Q . The government has not tinkered with tax slabs or policies indicating continuity and a matured approach. What are your views?
Answer : Consolidating with the current personal income tax slabs by not hiking rates is better in the light of covid led lockdowns. We had big corporate tax cuts announced during Sep-19. Also, extension of 17% effective tax rates for new manufacturing is a welcome move which should in-turn accelerate private investments. The government clearly wants to push forward capex led recovery vs a consumption led recovery.
Q . There has been some volatility in markets in recent weeks. What is the reason for the same?
Answer : Fears of sticky global inflation, tapering liquidity measures announced by US-Fed and geopolitical tension between Russia and Ukraine are the key reasons for the volatility in recent weeks. After two good years, it is natural to expect some volatility in the near term.
Q. What is your opinion on the market valuations at the moment? How are you playing the markets and sectors?
Answer : Current market valuations assume a good demand recovery over the next 12-18 months. Broader market valuations are pricing in the recovery. CY22 is likely to be a bottom-up stock picker's market. We continue to like businesses with current cash flows vs future promises. We are overweight Pharma, Autos & Cement and underweight on Financials and IT. As seen in the US market over the last few months, fund flows will favour strong cash flow generating businesses over loss making companies as liquidity situation tightens going ahead.
Q. What would be your advice to new and existing investors today? How should they play the equity markets?
Answer :Investors should expect 2022 to be more volatile than last year. Past experience tells us that equity markets have double digit drawdowns every few years. Despite that, the long term returns of this asset class remain unrivalled. We have seen that investor return is typically far lower than investment return. That can be traced back to investor behaviour during volatile times. The best way to ride out volatility is to invest via Systematic Investment Plans and take a long term approach. Volatility is the price that equity markets demand for superior returns.
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