'Growth is the horse; valuation is the cart'

The market has been giving the jitters to equity investors since the start of this year. More specifically, it is the mid-cap and the small-cap segment that seems to have succumbed the most to these challenging times. We speak with Pankaj Tibrewal, Sr. VP & Fund Manager (Equity) at Kotak Mahindra Asset Management Company, who has been navigating through this segment for over a decade now. He shares his insights about investing in this space, dealing with market crises and his investing philosophies in general. The current environment seems pretty challenging for mid and small caps. High inflation, rising interest rates and an overall looming threat of an economic slowdown make these stocks quite vulnerable. How do you navigate through these tough times and what variables do you keep a close eye on in respect of your portfolio holdings? I believe that testing times are great opportunities but it depends if you see the glass as half full or half empty. During corrections, we see differentiation has always been there and this cycle is no different. Therefore, we may see some excesses which were created over the last few years getting removed and the separation of men vs boys staying intact. If you believe in the company you are investing in, beyond a point, macros don't matter. In the last 20 years, there have been various crises and cycles. And the important thing is to ask yourself three questions. The first one is whether the profitability and the cash flow of the company are going to increase or decrease over the next three-four years. The second question is whether the management is reliable and whether it can navigate this volatility in the short term and come out much stronger from a medium- to long-term perspective. Time and again, we have seen how strong companies actually become stronger and develop strong roots, post the crisis. We have seen the latest one in COVID - how corporate India and many of the companies reduc

This article was originally published on July 11, 2022.