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    ETMarkets Smart Talk: Golden Rule! Invest 25% of income monthly to build wealth via equities: Abhijit Bhave

    Synopsis

    "Getting a robust process for stock selection along with a detailed checklist is the best way to navigate the complexity and difficulty of picking up likely future wealth creators."

    ETMarkets Smart Talk: Golden Rule! Invest 25% of income monthly to build wealth via equities:Agencies
    “Investing in the stock markets is all about discipline and perseverance. I believe any young Indian can build significant wealth over time and become financially independent if he/she invests 25 per cent of monthly income in a disciplined manner in equity and gradually increases the ratio as the income rises," says Abhijit Bhave, CEO, Fisdom Private Wealth.

    In an interview with ETMarkets, Bhave, who has over 25 years of experience across the financial services industry in India, UAE, and Vietnam, said: “We believe that a few midcap companies with strong management and robust business models will potentially become large caps over the next 3-5 years” Edited excerpts:

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    India has turned out to be the bright spot in the global arena. How do you see markets in the medium term?
    India's long-term structural growth story remains intact, and this is the main reason why domestic equity markets have outperformed their larger global counterparts since the beginning of this year.

    Even after global concerns like elevated inflation, hawkish central bank policies, and geopolitical turmoil, several domestic companies are around their 52-week highs. The same is true of the benchmark indices too.

    This happened on the back of the revival of FII inflows and continued domestic inflows in the form of retail participation through mutual fund SIPs, EPFO and NPS investments coupled with strong HNI participation.

    This positive momentum has been built up due to fundamental economic reasons like the resilience of domestic demand, early signs of a slowdown in inflation, strong credit growth, healthier bank balance sheets, and the government’s strong initiatives on manufacturing and infrastructure spending.

    India is expected to have the fastest GDP growth among the world's major economies. As always, it is difficult to predict short-term market moves, and the market is likely to move further northwards in the medium term.

    How to spot potential wealth creators of the future? What filters do you use?
    Getting a robust process for stock selection along with a detailed checklist is the best way to navigate the complexity and difficulty of picking up likely future wealth creators.

    a)The first and foremost filter must be competent and ethical management and saying a strict ‘NO’ to businesses with accounting and governance issues.

    b)The next filter would be to select businesses with strong competitive advantages and exhibiting high and consistent growth in earnings over a sustained period of over five years.

    c) It is easier to narrow down the wealth creators when the companies have strong financial ratios. The emphasis should be on Return on Capital Employed (ROCE) and FCF (free cash flow).

    d) And finally, one should look at the fair value of the stocks and go ahead and buy if the stocks are available at reasonable prices.

    What is driving the sugar sector? A lot of sugar stocks have hit fresh 52-week highs.
    The government had given the sugar industry a lot of support, placing it in an advantageous position compared to the past. With the implementation of minimum support price (MSP) and various other government programmes, as well as the increasing diversion of sugar to ethanol production, the government has successfully addressed the sector's unpredictable pricing and cyclicality.

    India also boosted its export share as a result of higher international prices and ethanol blending opportunities. This has led to higher stock prices across the sector.

    There is plenty of action in the consumer discretionary space. What is driving the rally in this sector, and are there any stocks which are looking attractive?
    The festive season has begun, and Diwali is around the corner. The consumer discretionary sector looks appealing in the coming days. The pent-up, post-pandemic demand from the larger cities will increase sales tremendously.

    We also anticipate traction from rural India against the backdrop of the recent strong monsoon season.

    Hence, we believe the positive momentum in the consumer discretionary space will continue for some more time.

    Where do you see the economy heading amid the risk of high inflation?
    Fundamentally, India is experiencing strong and long-term structural growth, and there is no question in my mind that this will turn out to be our nation’s golden decade unless there is another “black swan” event like Covid-19.

    There are various legs to this India growth story, including tremendous government push for financial inclusion, rerouting of savings from physical to financial assets, the popularity of electronic payment systems & the rise of digital platforms, and technological disruptions across all industries.

    According to World Bank research, India's rank in “ease of doing business” has improved from 142 in 2014 to 63 in 2022 and this reduction of red tapism with redefined global trade equations is adding more to India's growth story. This is expected to get only better from here because of the various initiatives under the “Digital India” push.

    This is clearly reflected in the fact that India is currently home to more than 100 unicorns with a total market capitalization of $240 billion. The push towards infrastructure and expanding the manufacturing capacity (PLI schemes) in line with our “Make in India” campaign will further supplement the growth narrative.

    While all these developments are unfolding, India’s inherent consumption story remains strong with the largest young earning population in the World.

    What is your take on the small & midcap space?
    For savvy investors, the small & mid cap space is in a sweet spot. It is better to play in this space at the stock-picking level as opposed to the index.

    It is also advisable to seek the guidance of a seasoned fund manager for this because the universe of mid & small-cap categories is vast when compared to large-cap equities and is under-owned as well as under-researched.

    The mid and smallcap space is appealing given the current economic scenario and has the potential for rapid growth and returning higher alpha over large-cap investments.

    As we have seen in the past, we believe that a few midcap companies with strong management and robust business models will potentially become large caps over the next 3-5 years.

    What would you advise someone who is less than 25 years of age and want to invest in stock markets? Can he dream of becoming a crorepati and what would be required?
    Investing in the stock markets is all about discipline and perseverance. I believe any young Indian can build significant wealth over time and become financially independent if he/she invests 25 per cent of monthly income in a disciplined manner in equity and gradually increases the ratio as the income rises.

    The simplest approach to get started is through using SIPs in equity mutual funds, with progressively assembling a portfolio of bluechip companies through direct stock investing.

    I also believe this is a special time in the journey of our nation with attractive wealth creation opportunities over the next few decades, and becoming a crorepati through equity investing is eminently possible if one follows the right investment strategy.

    To quote our Prime Minister, from his last year’s Independence Day speech, I truly believe the following in the context of equity investing & wealth creation not just for young Indians but all Indians.

    Yahi samay hain, sahin samay hain” (This is the time; this is the right time)

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