WF: Earnings have refused to grow. What is your realistic estimate on earnings growth in FY 17 and FY18?
Raamdeo: Estimates by most brokerage houses suggest 15-20% earnings growth for FY17 and FY18. However, we are much more focused on earnings growth of stocks in our portfolio, irrespective of earnings growth in the benchmark indices, or the listed corporate sector as a whole.
WF: PSU banks with all their NPA issues have got hammered in the market. Do they now represent a deep value play or a value trap?
Raamdeo: PSU banks per se are seeing value migrate to their private counterparts. Further, those PSU banks which do not have (or get) competent management team and operational flexibility may prove to be value traps than value buys.
WF: China - and specifically Chinese banks are the big worry now, and some say their problems are bigger than what US banks faced in 2008. How serious is this issue and how might it impact our markets?
Raamdeo: Chinese banking system may well be an important variable in the global scheme of things. But it is largely unknowable, and hence futile to be focused on. In any case, we believe it has limited direct impact on domestic portfolios.
WF: Analysts talk about the 8 year cycle and point to markets going much lower. There is talk of 2008 action replay. How should one manage portfolios in this context?
Raamdeo: Every cycle is different. But what is common across cycles is that if earnings growth falters for a long time, markets tend to be range-bound. And yet, irrespective of cycle, there will be enough opportunities to make money in companies which continue to prosper.
WF: What is the message that distributors should give retail investors who are now getting nervous as 3 year SIP returns are anaemic?
Raamdeo: For SIPs to deliver healthy return, we need one strong upcycle in the market, which has not happened in the last 3 years. We should advice retail investors not to lose patience at this juncture. In the final analysis, long-term investing is all about patience.
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