Markets at an all-time high but don't get swayed by the euphoria: Enam's Doshi

The markets have begun cheering after exit polls on Saturday predicted a clear majority for the ruling Bharatiya Janata Party-led National Democratic Alliance, with the benchmark Nifty and the Sensex reaching lifetime highs on Monday.

However, Jiten Doshi, co-founder and chief investment officer of Enam Asset Management Co. Pvt. Ltd (Enam AMC), advises caution, urging investors to view any market reaction—euphoria or panic—as part of a long-term journey. 

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Even during the most bullish periods in the 1990s and 2000s, there were instances of 15-25% corrections, he says, adding that savvy investors, however, can take advantage of the current bullishness in the market.

Doshi spoke with Mint in detail about his perspective on the markets and on investing. Edited excerpts:

The markets have rallied to fresh highs. At these levels, what do you suggest for long-term investors?

The term "long term" has been misused in recent market runs. For traditional investors focusing on generational wealth through equities, long term means beyond three to five years. Equities, as an asset class, allow for a compounding effect of value creation in the economy. For long-term investors, the biggest ally in wealth creation is time in the market. 

While many seek the perfect timing, a consistent, staggered approach towards investing in quality companies is key to sustainable long-term wealth. Systematic participation through market cycles makes time your friend in this journey.

What's your advice in case the market tanks or there is a euphoric rally when the election results are announced on 4 June?

The golden rule in investing and trading is to be cautious on the eve of an event. While 4 June will indeed be significant for India’s economic, social, and political future over the next 10-30 years, any euphoric or panic reaction should be viewed as a step in the long-term journey. 

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Yes, the market has run up recently, but even the historical bull markets of the 1990s and 2000s saw several corrections of 15-25%, which now seem minor in the broader market trend. Therefore, we remain opportunistic, using such market gyrations to invest during panic periods and staggering commitments when markets are strong.

What's your range for the Sensex/Nifty in FY25?

As bottom-up investors, we avoid predicting index levels. The index is dynamic and has seen over 50% turnover in constituents over a decade. Historically, equities have returned close to 13-14% CAGR over two decades. 

At a minimum, we expect these returns to continue long term, driven by economic growth, earnings cycles, and a diverse investor base. If current policies receive electoral support, these returns could accelerate in the near term.

What sectors and stocks are you most bullish on? Which ones will you avoid?

We are witnessing a confluence of factors like demography, digitization, democracy, and development, creating a multi-year growth runway for India. These factors are driving trends like premiumization, digital money, financialization, industry consolidation, healthcare, formalization, urbanization, import substitution, and manufacturing resurgence. 

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Thus, segments such as aspirational consumption, consumer discretionary, such as durables, mobility, retail, quick service restaurants (QSR), home improvement, BFSI, capex recovery, and healthcare are promising for long-term investments.

The Reserve Bank of India has given a substantial dividend to the government. How will this affect government finances? If used for capital expenditure, which sectors will benefit most?

RBI has played a pivotal role in post-pandemic India, complementing government efforts for stability and growth and managing currency volatility and related surprises. 

The recent dividend boosts government liquidity for capex, improves fiscal metrics, lowers borrowing needs, and could lead to lower interest rates, potentially even a sovereign upgrade. Sectors likely to benefit include infrastructure (road/rail connectivity), green energy, and strategic sectors like defence, aerospace, and railways.

Can we expect an RBI interest rate cut this year?

It's not about if, but when. RBI is proactive and steady. We expect any rate cuts to align with developments in the developed world, particularly the US. Rate cuts might precede the busy season of second half of fiscal year 2025, with initial cuts potentially being more significant.

What do you make of the FPI selling seen over the past two months? Is it long China, short India?

Foreign institutional investors (FIIs) have been steadily investing over the past 12-15 months, reallocating funds seeking alternatives to China. However, recent reallocations and attractiveness of Southeast Asian markets have impacted India flows. With India entering election season, both local and foreign incremental allocations have been cautious.

Do you still find value in mid- and small-caps? Or would you advise looking at large-caps that have compelling valuations?

Investing is about absolute returns, horizons, and risks, but also relative performance. The current market rally is driven by optimism on policy continuity post elections, earnings recovery, and domestic inflows into mutual fund schemes through systematic investment plans (SIPs), especially into mid and small caps. However, large caps are relatively better placed at current market levels given stretched valuations in mid and small caps.

What are the biggest risks for markets?

• Global uncertainties.
• 60% of global economies are in an election cycle; adverse results could impact sentiments and outlook.
• Changing economic cycles and their effects on monetary policies and interest rates.
• China's recovery, emerging market (EM) flows, and their impact on relative performance.

Also Read | Mint Explainer: Why the national election is making the market swing wildly