ETMarkets Fund Manager Talk: Lure of big money the major driving force for equity investors: Basant Maheshwari

Passion is the driving force for people pursuing cricket, acting or music as a profession, but the “lure” to make big money is the first and immediate driving force for investors entering equities, according to smallcase manager Basant Maheshwari.

“I kept losing for the first 9-10 years because I used to buy stocks trading at low prices and available at an absolute low P/E. I started teaching to make ends meet, but the underlying belief was that ‘paisa share bazaar se hi banega,” the co-founder of Basant Maheshwari Wealth Advisers LLP told ETMarkets.com in an interview. Edited excerpts:


Tell us about yourself? What inclined you towards equities and what was the turning point?
Everyone gets lured to the market by greed. Stock investors are different from cricketers, actors and musicians.

Passion remains the driving force in other disciplines like cricket, acting and music, but the lure to make big money is the first and immediate driving force for investors. But passion comes after an investor has learnt to get it right.

I kept losing for the first 9-10 years because I used to buy stocks trading at low prices and available at an absolute low P/E. When my family business was shut down due to external circumstances I had no money and no work.

I started teaching to make ends meet, but the underlying belief was that ‘paisa share bazaar se hi banega’.

I started reading books from people who had made it big and at that time the money that I had was the one that I couldn’t afford to lose. That changed my profit equation with the market.

Interesting. So talking about markets, domestic equities have recovered sharply from their June lows and now look set to hit fresh record highs. Do you see the momentum sustaining or would you call for some caution?
Over the last year we have seen that the fundamentals of the Indian economy has stabilised. We are one of the fastest growing nations in the world. Also, inflation for us is a much normal thing as we are more accustomed to this than the developed nations.

FIIs have reduced weightage from China due to their inherent internal problems.

The crunch line shows strong flows from domestic investors which have been resilient despite the global turmoil. Their money supply into the market has weathered all the storm.

Today our SIP exceeds the maximum amount that FIIs have ever withdrawn from the market. The Indian investor’s inflow continues unabated as he allocates more to equity and looks set to propel the market to higher levels. So the momentum looks like sustaining.

How much AUM do you manage, and how has your fund’s performance been so far in 2022?
We manage approximately Rs 400 crore of AUM under our PMS and smallcase fund. Our BM Vision 2030 smallcase fund has returned 28.49% since its launch in June, 2022.

Equity funds have seen sustained flows in 2022 month after month. Do you see a similar trend in 2023 or could one see more money moving to debt funds?

Indians have realised the importance of equity as an asset class. Still, only 5% of the household savings is invested in equities. So in all probability, the flow of domestic household savings into equities is a structural trend for the next decade.

Over the last few months we have seen the domestic equity flows sustain despite huge FII selling. Focused equity investing remains the only way to get rich over long periods of time.

How have you managed the market volatility and enhanced returns for your clients?
We believe in investing in only one asset class i.e. equities. Although some volatility is always part of investing in equities, we believe that investing in high growth companies which are sector leaders and where earnings can double in the next 3 years, is the way to generate long term wealth for our clients.

Markets can be blind in the short-term but over the longer term, stock prices dance to the music of earnings.

India outperformed global peers in 2022 because of the upbeat domestic outlook, and this saw preference tilting towards domestic-linked companies from export-oriented sectors. Do you see this phenomenon staying through in the near term?
This is the first-year of complete and normal year post the COVID recovery.

Demand has recovered for most of the domestic companies i.e. retail, consumer discretionary, hotels etc.

The Indian consumer has become more aspirational and we have seen healthy domestic demand revival. But over the next 3-5 years, the export-oriented companies should also benefit with the China+1 factor playing out.

The world is looking for a cheaper outsourcing base and with China’s per capita income hitting $10,000 , India remains a relatively better option to outsource.

SIP contributions have increased significantly and retail investors have somewhat shielded Indian markets from the global shocks. Do you see the trend continuing? Any ballpark figure you see by the end of FY23?
Yes, as we discussed, the flow of savings into equities is a structural trend. Digitisation has been embraced spectacularly by the rural and small town cities in the last few years due to cheap access to the internet.

Demat accounts have grown from 4 crore to 10 crore in less than 3 years. Also, apart from equity, no other asset class can make people rich.

Currently, the monthly trend of SIP is about Rs 12,000-13,000 crore. This figure has grown at 30% CAGR for the last 5 years. We think this number can go to Rs 18,000 crore in the next 1 year. The deluge of money will lift and support the market whoever needed.

What are your top holdings, and have you rejigged your portfolio recently? Any new entry or exits in your portfolio?
In our BM Vision 2030 Smallcase, we had bought Triveni Turbine (not a recommendation) few months back. Triveni Turbine is a market leader having domestic market share of more than 50% in the up to 30 MW steam turbine segment.

Healthy capex revival in the domestic market has been instrumental in the sharp upsurge in Triveni’s order inflows. The company has a strong aftermarket segment and overseas business, while the domestic market is also showing distinct signs of pickup.

What would be your top bets for 2023?
We are bullish on online discount brokerages given the big opportunity for them to add new clients from smaller tier 2 and tier 3 towns, and getting a higher wallet share from them by providing wealth management services.

We are also optimistic about the organised retail market which serves the young and aspirational Indian consumer.

We have one stock in our BM Vision 2030 smallcase, which is catering to the wedding celebration market, and we believe it can grow at 25% CAGR for the next 3-5 years.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)