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    ETMarkets Smart Talk: Deploy 50% in largecap equities & 30% in govt bonds, 10% in gold & rest in cash: Siddarth Bhamre

    Synopsis

    By now most of us know that the SVB fiasco was a clear case of asset-liability mismatch. Smaller the bank higher the chances of ALM when any asset class shows an unusually large move -- in this case it was ‘interest rates’.

    Siddarth Bhamre (1)ETMarkets.com
    We believe more than new entrants we should concentrate on which existing players in the automobile and energy space are evolving faster to meet the change in the world order.
    "A blend of selective equities and government bonds will reward investors over a period of the next 1-2 years," says Siddarth Bhamre, Head of Research, Religare Broking Limited.

    In an interview with ETMarkets, Bhamre said: “Recent correction in large-cap stocks offers a good opportunity. Mid and small-cap stocks may show higher volatility in coming months and we would suggest less exposure in this space” Edited excerpts:

    From a fund manager’s point of view - what led to the downfall of SVB Bank and Signature Bank in a matter of hours?
    By now most of us know that the SVB fiasco was a clear case of asset-liability mismatch. Smaller the bank higher the chances of ALM when any asset class shows an unusually large move -- in this case it was ‘interest rates’.

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    Also, smaller banks do not enjoy a well-diversified portfolio and a scattered customer base. As bond yields continued to jump, SVB failed to meet cash withdrawal demands and hence FDIC took over the functioning of the bank.

    Signature Bank is less than half the size of SVB in terms of assets, with its portfolio having high exposure to real estate and crypto deposits. The impact of SVB had a rub-off effect on Signature Bank and hence the downfall.

    The selloff continues in the stock market across the globe – fear of contagion. Is there a prolonged impact you see on stock markets?
    Selloff in global markets is led by banks and it’s the fear of contagion which is driving this selling. Though large banks may not have big issues; however, some of the large European banks have corrected substantially led by Credit Suisse due to its investment issues which we believe is not dire.

    This is not a Lehman-like crisis and may not lead to any major financial crisis either but the stock market is governed by greed and fear and at this point in time fear gauge reading is high.

    However, a fall in US10YR from 4.1% to sub 3.5% would ease the pressure on the bond portfolios of banks. This fall may not continue for long, and we will be back to analyzing countries and stocks as per their growth prospects and hence we believe there won’t be a prolonged impact on stock markets.

    How will investors create wealth in FY24 – will equities play a definite role or other asset classes will dominate investors' interest?
    There is enough historical evidence to suggest that such opportunities should be used to increase exposure towards equities to generate higher returns and we would like to stick to this approach.

    Having said that debt offers a good risk-to-reward ratio too as bond yields may have topped out. So, a blend of selective equities and government bonds will reward investors over a period of the next 1-2 years.

    In terms of portfolio construction – how much should one allocate to largecaps, small & midcaps, gold, fixed income and US stocks and why?
    Recent corrections in large-cap stocks offer a good opportunity. Mid and small cap stocks may show higher volatility in the coming months and we would suggest less exposure in this space.

    Gold can be used as a hedge but not as an investment. Fixed income as we mentioned is attractive. So, the portfolio should look something like this –

    Large cap equities – 50%
    Long tenure government bonds – 30%
    Gold – 10%
    Cash – 10% (to be invested in equities at dip)

    After the recent correction many stocks have come down in double digits. How should one avoid catching a falling knife?
    If you are a trader then certainly not, as one has to follow the trend. Falling knife terminology is for traders. As far as investors are concerned, if we can look beyond inflation and short-term ALM issues for banks then falling stocks are those opportunities that are sent by the market once in every 2-3 years. Grab it.

    How should one play small & midcap stocks in FY24?
    There will always be a stock-specific opportunity in this segment but as a basket, we will suggest limiting the exposure. Earnings have been far from impressive and a valuation cushion despite correction has still not emerged.

    If the market stabilizes and inflation is tamed with clarity emerging on FEDs action, the market may get back into risk-off mode and that is when the exposure in the mid and small-cap will be desirable, not now.

    Specialty chemicals were talked about the most some years back and now it is EV as well as green hydrogen industries. Will the next decade belong to companies operating in these 2 sectors?
    Most of the major EV players are again those who were leaders in the automobile space in conventional form. If you look at the top 5 EV players in the world, then barring Tesla, the other 4 have been there for decades.

    Same will transpire into energy space when a hydrogen cell power source will be the preferred mode to run the vehicles. The next decade will see hybrids and all-electric vehicles gaining market share.

    We believe more than new entrants we should concentrate on which existing players in the automobile and energy space are evolving faster to meet the change in the world order.

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





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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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