'Negative SIP returns in short to medium term is a blessing in disguise'

One should increase the amount or number of SIP when the negative returns are higher because when the market recovers, the return on accumulated corpus would be higher and one would end up accumulating higher corpus, Pankaj Pandey, Head of Research, ICICI Direct, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts: 

Q: Do you think investors are caught in this dilemma in the current market environment – ‘What is looking cheap is not safe, and what is safe is not cheap’?

A: Notwithstanding the recent fall, the valuation dichotomy has been here since the last 2-3 years. The Indian equity market has witnessed a strong divide in valuations across quality and ordinary businesses notwithstanding market capitalisation which warrants that investors should be stock specific.

Emphasis should be on buying a business that is run in a capital-efficient way and possess sustainable growth prospects. Well, the harsh reality is that quality always commands a premium valuation, albeit it is accentuated in the current market environment.

Q: 2019 could turn out to be the year in which many multibaggers could be born if someone holds them for a long term period. What are your views?

A: With a deep price correction, this year presents investors to have a re-look at quality companies with capital-efficient businesses and consistent cash flow generation that can provide strong returns over a long-term.

Period like this should be utilised to accumulate such stocks through SIP to build up a long-term equity portfolio for wealth creation.

Q: How should investors make a case for investment at a time when everything is falling?

A: Warren Buffets famous quote that it is wise to be “fearful when others are greedy and greedy when others are fearful” is apt advice for investors in a market as such when cyclical uncertainty and volatility is clouding long term growth potential of an economy.

We believe that volatility essentially opens an opportunity to build a good long term portfolio.

We continue to advise investors to stick to quality names that have a capital-efficient business model with sustainable growth prospects to steer through the market volatility.

Credit: https://www.moneycontrol.com/news/business/personal-finance/negative-sip-returns-in-short-to-medium-term-is-a-blessing-in-disguise-4324631.html