"Not too concerned about valuations in Indian markets": DSP's Rohit Singhania

Rohit Singhania has been with DSP Mutual Fund for nearly 18 years. During our conversation, he sheds light on the current market conditions, the team's focus on business fundamentals, and their dynamic investment strategy. Here is an edited transcript of the interview.

How do you assess the current market conditions and valuations?
If you see, in the last few months, what's improved in India is our macros. Current account deficit is less than 1.5 per cent of GDP, domestic liquidity is around Rs 3 trillion, and our forex reserves also back to above USD 600 billion. When you look at the GST collections, they have been growing at double-digit (~12%) on a YoY (year-over-year) basis.

In addition, the commodity prices, specifically oil, give a lot of breathing space to the domestic markets. So, when I see the macro part of the equation, things seem to be much better than what we expected about six months back, and it has changed the broader sentiments for the Indian markets.

I'm not too concerned about the valuations in Indian markets, as the one-year forward Nifty P/E is trading at ~19.5x which is not a worry.

However, there are a few aspects which we need to look out for. Exports are slowing down because of sluggish global demand). When we talk about India, we talk about consumption trends which is not seeing any green shots as yet. Entry-level consumption still remains weak, IT hiring has been negative since Oct'22. Monsoon continues to be a sentimental factor, however, data on monsoon seems to be improving.

Keeping these factors in mind and the macro on the other side, I would urge one to be slightly cautious on these data points. Though there are no worries about valuations and macro, we still need some clarity on bottom-up factors. I would focus on corporate earnings because finally they are drivers of markets over longer period of time.

The recent rally has lifted new-age companies like a rising tide lifts all boats. But DSP doesn't seem too enthusiastic...
For us, the investing framework is how well we understand the business and what drives its moat. And secondly, at what valuations would we be comfortable buying and holding them?

So, we don't want to take a call just because stock price is going up or the FII (foreign investors) flow picking up in some of these businesses. If you look at the news flow of any of these companies over the last one-and-a-half years, it's been very varied as it moves with sentiments. Hence, we are in a wait-and-watch mode.

While your DSP Tax Saver Fund boasts an impeccable long-term track record, its one-year performance has been patchy...
The underperformance has come in the last four or five months. A few of our stocks, where the business opportunity is good, have not performed due to mostly non business related reasons.

Also, the majority of my stocks with big active weights are almost flat down, despite the markets rallying. That's the reason which has impacted the last one-year numbers.

But if I look at the portfolio, it gives me confidence. I don't need to make big changes or worry about anything as a fund manager.

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