Mumbai: A high-performing fund manager went against the crowd as the Indian stock market crashed on the virus.
We’ve “been buyers every day,” said Rajeev Thakkar, the chief investment officer of PPFAS Mutual Fund. “We haven’t sold any stock.”
Indian shares plunged into a bear market on fears of the impact of the coronavirus, falling 13% in a day last week for the biggest decline on record. The country has locked down for three weeks, putting 1.3 billion people into isolation.
For Thakkar, this won’t be as bad for markets as the global financial crisis. The fallout will be eased by massive support measures from central banks and governments, he said.
“Policy makers have been far more prepared” than in 2008, he said. The extent of the sell-off “is excessive even assuming one year of zero earnings.”
Thakkar’s Parag Parikh Long Term Value Fund has beaten 90% of peers over the past five years, according to data compiled by Bloomberg. It’s fallen less than its benchmark this year.
Global equities rallied for three days in the middle of last week as the U.S. approved a more than $2 trillion rescue plan. India announced a $22.6 billion package, also sending the S&P BSE Sensex to a three-day gain. Still, the nation’s stocks remain one of Asia’s worst performers in March in dollar terms.
Thakkar said some good news is being overlooked in the rout. Take Brent oil, which has fallen to its lowest level since 2002, a major boon for a country that imports more than 80% of its crude. Another example is low to negative interest rates globally. The Reserve Bank of India cut rates by 75 basis points in an emergency move last week.
“We’re not saying that these levels are the absolute rock bottom and that prices can’t go down from here but these positives are getting ignored completely right now,” he said.
Investing Abroad
The fund house was founded in 2013 by Parag Parikh, one of India’s best-known value investors. Tragedy struck in May 2015 when Parikh died in a car crash in Omaha, Nebraska, where he had gone to attend the annual shareholder meeting of Warren Buffett’s Berkshire Hathaway Inc.
It’s unusual for an Indian mutual fund in that it’s globally diversified, with room to invest up to 35% of assets in overseas stocks. This helps it invest in areas such as e-commerce and the internet, which aren’t easy to play through India’s listed equities. Google parent Alphabet Inc., Amazon.com Inc. and Facebook Inc. are among the fund’s top 10 holdings.
The fund beat its benchmark in 2019 largely because the U.S. market outperformed India.
Some holdings may benefit from the virus crisis, according to Thakkar.
“Amazon has hired more people and increased wages,” he said. “Not all companies will be adversely affected.”
The fund also invests in overseas parents of Indian listed companies, because they are often cheaper. Suzuki Motor Corp. trades at about 12 times earnings, compared with about 17 times for Maruti Suzuki India Ltd. Nestle SA is valued at about 22 times profits, compared with about 77 times for Nestle India Ltd.
As long as investors have a long time horizon, now is a good time to buy more shares, Thakkar said.
“People who view equity investing as owning a business would find this an opportune time to invest” as long as they hold for at least five years, he said. –Bloomberg
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