Today, though there is a belief that India is a relatively resilient economy, no sector or country is functioning in a vacuum and the impact of the global slowdown will be felt on Indian stocks, said Roshi Jain, Senior Fund Manager, HDFC AMC at the 6th Value Investing Pioneers Summit organised by the CFA Society India.
Talking of the relative merits of growth versus value styles of investing, she said that the two styles cannot function in silos, as assessing growth is inherent to determining the intrinsic value of a business.
She added, “Value investing is often confused with buying cheap stocks. But that’s a misnomer. The key job of a value fund manager is not just to identify stocks trading below their intrinsic value, but also to identify what can trigger value unlocking and when. There’s an opportunity cost to holding on to cheap stocks for long.”
Factors like management change, investments in capex, or a policy push by the government towards manufacturing, and so on could all act as possible triggers for towards unlocking the value of a stock.
Aarati Krishnan, Consulting Editor, BusinessLine, who moderated the session, said that value traps were plentiful in Indian markets as cheap valuations often masked promoter or governance risks.
Sandeep Kothari, Founder and CEO of East Lane Capital presented data to show that in the long run, market values of stocks align with profit growth. When excesses happen, as they did with dotcom stocks in the late nineties or real estate stocks in 2007, investors tend to face periods of long underperformance as a course correction happens.
Rajashekhar Iyer of Securities Investment Management, talked of the merits of fundamental investors using some technical tools such as stop-losses to ward off behavioural mistakes that are common in investing.