ETMarkets Smart Talk: Sumit Chanda of JARVIS Invest highlights 5 golden rules while picking stocks

In an interview with ETMarkets, Chanda who has over 18 years of experience in the BFSI space, said: “I feel the Banking Sector will turn out to be the dark horse for this year. We have witnessed the sector taking a beating due to Covid and its after effects,” Edited excerpt

As we step into the second half of 2022 – what are your expectations from markets? Do you think 2H2022 will be better than 1H2022 as most negatives are factored in?

I agree that most of the negatives have been factored in. However, the threat of a recession in the US still looms, there seems to be no end to the Russia-Ukraine conflict, Oil is way beyond our comfort zone, Rupee is making new lows almost every day, the effect of rate hikes on the inflation levels and its implications on growth is yet to be seen.

With these in mind, I would say that 2H2022 will be subdued with some action expected in the far end of the year post the June quarter results when the markets start factoring in FY23 numbers.

However, one thing is for sure, volatility is here to stay and it’s time we plan our investments around it.

Gravity seems to push the Rupee to fresh record lows. How will this impact foreign investment and FII flows?

As I said earlier, the Rupee is making new lows almost every day. Though the central bank is intervening, it is not talking about maintaining it at a certain level, it is acting to ensure reduced volatility.

I feel it will go down further as our Current Account Deficit (CAD) rises further. The outflow from FIIs & FPIs that we have been witnessing was to be expected.

As a matter of fact, they have been selling in markets with high CAD where the currency can depreciate further. With the US Fed increasing the rates, the US treasury yields have spiked. The flight to safety was expected.

This trend will continue for some more time since the Fed is not done with increasing rates. This will push the Rupee further. Having said that, from a medium to a long-term perspective, we are in an investment sweet spot.

When some semblance of normalcy returns globally, we would be better placed than the other economies.

With decades of experience under your belt – what are your 5 rules while picking stocks?

I would share my 5 rules for investing, which is something I have built in JARVIS as well.

1. Know your risk appetite. Know how much of a hit you can take without losing sleep.

2. Take emotions out of the investment decision making process. That is why our mantra has been “Love the Money, Not The Stock”

3. Stick to your asset allocation. Every investor is different. The asset allocation will also vary. Know what best suits you.

4. Active management is key to get maximum returns out of your investment. However, this has to be done keeping in mind the cost and the tax implications. Long term investment is the key to wealth creation, but be constantly on the lookout for opportunities.

5. Never leverage to invest.


Indian market has been more resilient when compared to say US markets or other EMs in the past 6 months or so – what does it tell you – strong macros or strong DIIs? Which one is more prominent factor?

The DIIs have provided the much-needed support to the markets preventing a free-fall. However, as I mentioned earlier, we are better placed than most of the other economies.

Our inflation levels, our growth expectations, Capacity utilisation, local demand, everything is better off than others. While uncertainties overshadow our economy in the shorter term, from a medium to long term perspective, buy “India”.

We have been seeing many memes saying “My FD is giving more returns than stocks”. With interest rates on the rise and global tensions – how should investors structure their asset allocation?

We have witnessed multiple life-altering events in the last two decades; some very recently. We came out of it, we moved on. The people who were able to make money consistently, were the ones who had a disciplined approach to investments.

They didn’t let their emotions dictate their decision-making process. As I said earlier, take out emotions from the investment decisions and you will make money.

An investor’s asset allocation should be incumbent on his/her risk profile which is again a factor of multiple variables. One cannot have a “One size fit all” allocation process.

In my opinion, Equity as an asset class will pay handsome rewards in the long run. However, it doesn’t mean that one goes all in and invests everything into equity.

One should talk to his/her advisor, deep dive into his/her financial situation and then come to an informed decision on where to invest their money and how best to diversify it across asset classes.


Which sectors will be in the spotlight in 2H2022?

With Rupee in a downward trend, IT & Pharma can look at windfall gains in the near future.

Any sector that could turn out to be a dark horse of 2022 and why?

I feel the Banking Sector will turn out to be the dark horse for this year. We have witnessed the sector taking a beating due to Covid and its after-effects.

However, as the economy recovers, we would see improved performance on the backs of improved business growth and asset quality. This will only be aided by the festive season in the next few months.

While the rates are being hiked, I don’t think it will have a material impact on the credit offtake as the demand is expected to soar. We have already witnessed a surge in demand in the real estate sector.

For risk-averse investors – do dividend-paying stocks make more sense? Or they can look at MNC companies listed in India. Any thematic themes which is now looking more attractive amid global factors?

For me, Risk-Averse and Equity Investments are contradictory terms. As a matter of fact, I just rejigged the risk profiles on my system and took out the “Risk-Averse” profile.

If you are a risk averse investor, now is not the time to experiment in the markets.

If at all you want to fulfill your urge to invest, go the SIP way and make staggered investments over the next 9-12 months with at least a 3-4 years investment horizon. With such an investment horizon, look at diversifying across market caps.

After the recent fall is the Nifty50 trading at reasonable valuations? Or there is still some scope of further downside? How is trading with respect to global peers?

The Nifty50 has corrected by almost 9% YTD and is now at a reasonable valuation compared to its global peers.

Bulk of the FII and FPI money have already moved out. These are good levels to enter, in a staggered manner though. As I said earlier, volatility is going to be the new normal for some more time. Look to ride the wave.

How do you see the IPO market in 2H2022 after the recent IPO which fail to cheer retail investors?

It will not be as spirited as we witnessed last year where almost every issue got listed with premium.

We will see subdued reactions to IPOs this year where investors will actually analyse and buy companies with strong balance sheet, good order book and good management. We can expect the enthusiasm to return by Q2 FY23.

With 10.8 cr registered investors on BSE – what is your advice on how to navigate the rest of 2022 or FY23?

Here is what we recommend-

1. Stick to your asset allocation

2. Keep emotions in check and you will get opportunities even in this market

3. Stagger your investments into equities and ride the volatility wave.

This advice is good for all market conditions.

As for FY23, before you start factoring in FY 23 prices, wait for the June quarter results to get a better picture.

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