Mr. Vinit Sambre

Head - Equities , DSP Mutual Fund

Vinit Sambre is Head – Equities at DSP Investment Managers. He has been managing the DSP Micro Cap Fund since June 2010 and is also the Fund Manager for the DSP Small and Mid Cap Fund. Vinit specializes in the small and mid-cap space and has over 20 years of relevant work experience.

Vinit joined DSPIM in July 2007, as Portfolio Analyst for the firm's Portfolio Management Services (PMS) division, which manages discretionary accounts and provides advisory services to institutional clients. As a research analyst, his focus was on sectors like Pharmaceuticals, Power Utilities, Chemicals, Fertilizers and Textiles.

Previously, he was with DSP Merrill Lynch as a part of its Global Private Client business. He spent 20 months at DSP Merrill Lynch as Equity Strategist. Prior to DSP Merrill Lynch, he was employed with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. He has also worked with UTI Investment Advisory Services as Equity Analyst for the offshore fund - India Growth Fund. Vinit is a Chartered Accountant from Institute of Chartered Accountant of India.

Q . What would you say about the current market valuation? Should an investor be worried?

Answer : We are witnessing a convergence in valuations and earnings. Interest rates are normalizing back to pre-covid levels. This is having a contractionary impact on equity valuations. Nifty Price to earnings multiple has contracted by 200bps with ~100bps rise in corporate bond yields. At the same time, earnings are growing steadily. There is a bit of loss of momentum in Nifty EPS growth from FY21 to FY22 and FY23 numbers are likely to see an earnings growth of 14% to 15%. At FY23 PE of 19 times, Nifty looks slightly above average in terms of valuations. Expect this convergence, i.e. contraction in valuation multiples and steadiness in earnings, to continue. We don’t see many reasons to worry. But there is certainly more reasons to be selective and bottoms up focussed with many sectors beginning to recover from pandemic disruptions.

Q . How will the increasing oil and steel prices impact the equity markets and stocks in particular like consumer staples?

Answer : We are already witnessing signs of raw material price increase eating into margins. Commentary from consumer staples sector is one of caution due to slower volumes, rising input costs and margin pressures due to downtrading. This impact was beginning to become more pronounced after the geopolitical conflict began in Feb 2022. We expect this to play out over the next 2 to 3 quarters. Most of these stocks are reflecting these expectations in their performance.

Q . Please share your views on the current economic situation in the country considering the Russia and Ukraine war.

Answer : Indian remains vulnerable to high crude oil prices. As per our estimates if Oil continues to remain in the range of $100 to $110, India will scrape through with minor adjustments. But if Oil prices were to remain high for an extended period, say 2 or more quarters above $125, India is likely to see more inflationary pressure and higher deficits on the current account. Indian economy is witnessing a steady recovery for now and remains much more resilient that most large economies. Our base case remains a stronger economic recovery with steadier markets in the second half. Bouts of volatility are likely to continue.

Q . Why are FIIs selling and what impact can it have on the equity market?

Answer : Firstly, the Emerging Markets basket has seen a substantial selling from FIIs. India being part of this basket with ~9% weight gets its fair share of outflows which are commensurate with the EM basket. Secondly, the earnings growth in India has slowed versus the last two financial years, FIIs usually follow the earnings cycle. In addition to these points India was trading at a record premium to its EM peers which also led to some reduction in India weightage in some active funds. However, the reasons for FIIs to sell now are lesser and it’s possible that the majority of FII selling is behind us.

Q . The US Federal Reserve has raised interest rates and signalled further hikes in the near future. Do you see the markets correcting further from here?

Answer : FY23 is likely to be a year of consolidation with select businesses likely to do well. US Fed rates hikes, RBI monetary policy rationalization, Inflation headwinds and geopolitics are all the short-term worries on markets mind. Most of them are likely to provide bouts of volatility. As investors we feel these worries provide a fertile ground to pick quality stocks this year.

Q . The US Federal Reserve has raised interest rates and signalled further hikes in the near future. Do you see the markets correcting further from here?

Answer : Use this year to build a high-quality portfolio of funds which are focussed on buying strong business franchise. Keep investing with discipline.

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