Mr. Viral Berawala
Chief Investment Officer, Essel Mutual Fund
Viral Berawala is the Chief Investment Officer at Essel Finance AMC Limited. Previously, he has worked with Reliance Nippon Life Insurance Company Limited as Chief Investment Officer for about 5 years where he was responsible for a total asset size of USD 2.9 Billion.
Prior to that, he worked at Reliance Capital AMC as an assistant Fund Manager, for the Reliance Equity Opportunities and the Reliance Tax Saver Fund. As an analyst, he has worked in IT, Oil & Gas, Real Estate and Retail sectors.
Prior to that Viral worked for over 7 years in TCS in Corporate Finance as well as technical roles. Viral comes with over 18 years of experience in the Financial Services and Information Technology sectors. Viral is a Chartered Accountant and a PGPX from the Indian Institute of Management, Ahmedabad.
1. What are your views on the recent carnage in the equity markets?
Answer: Recent steep fall in indices is more of a reaction to strength in crude, stretched valuations across sectors and massive liquidity surge seen in the equity markets in recent times. With crude rising above $80/bbl, there is a massive fear of India missing its fiscal deficit targets, increasing inflation and slowdown in economy. This coupled with drying up of liquidity in certain segments in debt market lead to a massive blow out in equity markets
2. How do you assess the current situation of ? What impact earnings do you see going forward?
Answer: The current situation does not alter the long term growth thesis of above 8% GDP growth in Indian economy. This growth along with increased saving and channelization of these savings in financial assets should provide a spurt to the overall up move in financial markets.
Of the factors affecting the current situation, the key determinant of earnings going forward would be the levels at which crude stabilises at. With India importing 80% of its crude (3 million barrels per day of crude oil), resulting in a sensitivity of 40 basis points on GDP for every $10/bbl move in oil. We do not see a major impact to earnings growth of close to 20% CAGR over the next two years unless there is a major up move in crude.
3. How do you manage the volatility in your funds? How did you manage /limit the impact of market in your funds?
Answer: As a fund house we don’t take cash calls but we manage volatility in our funds by investing in low beta stocks.
We have managed to limit the impact of market in our funds by adhering to our framework of holding well researched, liquid and quality stocks in our portfolio.
4. How do you make buy and sell decisions for the stocks in your funds?
Answer: We have a well-documented investment philosophy backed by rigours research which forms a backbone of our buy and sell decisions in our funds.
We invest in stocks where we have already done our research in terms valuations, business dynamics and market scenario.
5. How do you assess the valuation of different segments in the markets? With heavy corrections in the mid-small cap stocks, is the segment now attractive?
Answer: Valuation of certain segments like Media, export oriented sectors, private banks and selective gas stocks have reached attractive levels while certain segments like NBFC’s have still some froth left.
The fall gives us an opportunity to buy quality mid-small stocks available at reasonable valuations. We see reasonable buying opportunities in mid cap stocks in the above mentioned sectors
6. What is your outlook from the markets and what would be your advice to the existing as well as new investors in equities?
Answer: Outlook for the markets from here on continues to be bullish. From consumption to construction, India remains one of the only markets with cyclical growth still on the up cycle. Along with this, certain macro data indicators like Inflation, GDP and IIP also point to a healthy outlook.
Going forward, markets are expected to benefit from good earnings growth, a pickup in capital expenditure, decent monsoon, limited exposure to trade wars and upcoming festive season.
Advice to existing and new investors in equity would be to maintain or increase their asset allocation to equity markets but be selective in stock picking and avoid companies affected by high leverage, changing government regulations and global linkages.