Nilanjan Dey

Kolkata, Aug. 12 Mr Bharat Shah, CEO, ASK Investment Managers, equates timing the market to playing the casino.

“You know how unfavourable your odds are of winning in a casino. Only a handful wins over time, the rest enrich the casino owner”, he maintains.

He further dwells on the usual underestimation of the potential of corporate India.

Excerpts:

When the broad market has done reasonably well, what value-addition can PMS providers really add?

That’s a classic debate. The question is whether you should buy active management of funds or whether you are better off buying the index.

If you purely go by the track record across markets, then there is empirical evidence that probably in 2 out of 3 cases, indices have done well, if not better than the active managers.

But it also means that for the rest, active managers would have done better than indices over materially long periods.

While you can always put money in an index, you need to realise that a pure index approach would necessarily mean under-performance.

That is because you cannot exactly get the actual index performance and it would invariably be a tad lower.

Also, index trackers would give you index performance, which can be positive as well as negative.

However with active managers, you would expect absolute, positive returns, albeit over a stretch of time.

Markets are still high. Is it the right time to invest in equities or even in PMS?

There would be ups and downs in the market. But clearly, there remains a secular growth trend with superb long term compounding opportunities.

I am confident market prices would track that long term growth. Here is the Indian economy, which is expected to grow at a healthy rate for a considerable length of time. So long as we understand this aspect, choose opportunities well, buy that growth and remain with it, we would get the power of compounding.

Given this scenario, you cannot go wrong on a long-term basis.

But questions about high levels do arise?

Yes, they were raised even when the Sensex had touched 10,000 points! But it was a questioning more with respect to history rather than future (earnings or their sustainability).

And investing is all about the future and very little about the past.

Also, very clearly there is an underestimation of the potential of corporate India.

For example, when March 2007 quarter earnings came up, they were much better than what people had predicted.

Then it was immediately predicted that June quarter would not be very good.

Now June quarter is over and you have seen the numbers, which are pretty good and far better than what people were suggesting.

So people are probably not coming to grips to estimating the real growth adequately.

Can PMS products be made available to smaller ticket investors too?

Well, private client business is a private client business.

To the extent that the business is about a certain approach and a certain philosophy, you have to appreciate this issue in that context.

This business is striving for a custom-built, bespoke and long term solution for clients.

It involves high-end service, requiring a great deal of personal attention.

Now, if you take a different stance and ask whether ticket size is moving up, I would say that it would depend on each player’s competitive stance. As for the retail space, there are alternate methods of delivering the required services.

And that is an important separate space in itself.

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