ETMarkets Smart Talk: We stick to Roots and Wings approach to pick stocks in 2023: Ram Kalyan Medury

“The Investment philosophy does not change with market movements – we prefer to stick to Roots and Wings as the way to go,” says Ram Kalyan Medury, Founder & CEO, at Jama Wealth.

In an interview with ETMarkets, Medury, said: “Companies with strong balance sheets and growing earnings will continue to be our picks” Edited excerpts:

As we approach the last month of the year 2022 – we have reclaimed all-time highs. Where do you see markets headed in 2023?
While we have had recent all-time highs, the geopolitical and global recession bad news is still not over.

So, our outlook as of now is stable. While the indices have run up of late, one can moderate expectations in the near term.

The year 2022 was full of volatility and global events which impacted the Indian markets. Will the headwinds of 2022 continue to haunt equity markets in 2023 as well?
The Ukraine War is still raging and the final word on the US rescission is not still out. It is an open secret, everyone talks about it, but the markets are not reflecting that.

The US economy and pretty much the global economy is not in a great shape. So, you may be right that some of the head winds in terms of higher interest rates and global geopolitics will linger.

Which sectors are likely to hog the limelight in 2023?
We have seen the BFSI sector deliver a 12% revenue CAGR and 33% profit CAGR over the last three years. This trend ought to continue over the next couple of years if earnings growth in India stays above the other global markets.

Chemical is a sector that has seen significant CAPEX investments that ought to yield fruits. More than sectors, we believe in specific companies that are meeting our investment philosophy.

Rate continued to rise in 2022 – do you see further rate hikes in the year 2023?
The interest rate hikes seem to have plateaued for India. The US has already seen some of the steepest hikes compared to previous episodes over the last two decades. They might be forced to increase, but it will not be like the runaway increases we have seen.

Amid rate hikes, global headwinds, and slowdown concerns -- how should one pick stocks in 2023?
The investment philosophy does not change with market movements – we prefer to stick to Roots and Wings as the way to go.

Companies with strong balance sheets and growing earnings will continue to be our picks.

How are earnings likely to pan out in 2023?
With all the structural reforms in place and focus on infrastructure, and manufacturing incentives, we expect earnings growth to continue.

The impact of higher input costs due to inflation has likely abated. In fact, one of the leading brokerages projected a 15% growth for 2023 and 2024.

Other than a massive global recession, this expectation should play out over the next couple of years.

As we have already hit unchartered territory – what is the kind of fundraising you see for IPO? Do you see more SME IPO to hit the Street?
India is full of startup with great ideas, solving problems that we have been putting up with for decades.

More IPOs will continue to come in, though the macro situation might cause a mellow down in the primary market listings. Liquidity will continue to play a decisive role. Pricing can be an issue, but we will see some IPOs come to the market.

According to two depositories, NSDL and CDSL, the total number of demat accounts is 9.28 crore as on April 30, 2022. This number is almost three times the number recorded as of March 2020. What is the kind of growth you foresee for retail investors in 2023?
Yes, CDSL & NSDL together added 1.43 cr new demat accounts in FY21, which is close to the total accounts added in earlier 4 yrs. It means more investors are entering the equity market, particularly, the next generation, which is not afraid and does not have an overhang of past losses.

We only have about 6% of the population having demat accounts, compared to 55% in the US whereas China is at 13%, almost twice. This is a secular trend and will continue.

However, the concern is how many will remain active after seeing a few hard knocks in the market.

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