Family businesses cannot be bucketed in one single category or even compared directly with each other. The reality is that each family business comes with its own history, its own dynamics, and its very own journey. These vastly differential paths lead to very different genes and vastly different external faces for these businesses. Any attempt to grade them or straight-jacket them will not be a viable or a wanted activity

“Many stocks beyond 10-15 Nifty companies are trading significantly away from their 52-week highs. So, while Nifty50 might paint a different picture, there might be opportunities beyond these companies which investors need to watch out for,” says Rohit Karkera, Co-Founder & Head (Investments), Cervin Family Office.

In an interview with ETMarkets, Karkera said: “Fund managers seem to be value buying in this dip. Managers were favouring value stocks over the growth stocks in the past 3-6 months.” Edited excerpts:

Sensex, Nifty50 slip below crucial support levels – top 5 factors which are weighing on D-Street?

Here are 5 reasons which might be weighing on D-Street –

(1) Rise in interest rates. While the markets know that the rates will rise, what is making them nervous is the pace and quantum of hikes.

(2) Russia Ukraine conflict. As the war stretches on, the disruptions it has created in economic linkages and its impact on global growth is unnerving markets. Any more escalation will further increase the anxiety.

(3) Inflation. As inflationary pressures build up globally, markets are facing the risks of significant rate hikes by central banks to fight inflation. Investors fear this may impact growth in the near to medium term.

(4) FII outflows. FII selling continues to be relentless over the past few months as yields rise in the US and foreign investors book their profits. Domestic investors have been holding fort as far as putting money in the equity markets. Any slowdown in flows by domestic investors may further put pressure on the markets.

(5) Corporate Earnings. Initial results show companies’ margins being under pressure due to higher input costs. The risks the markets are seeing is the ability of India Inc to pass on this to end consumers and at the same time hope for improvement in revenues in next 2-3 quarters, to justify the valuations at which markets are trading.

Small & midcaps have already entered bear territory (down over 20% from highs). How should investors play this theme? Time to turn cautious or if someone plans to invest now what is the kind of time horizon that one should look at?

We had already given exit calls in this segment (especially small caps) in the past 6-9 months due to the higher valuations they were trading relative to the large-cap peers.

While selective companies in this space might be doing well and would be able to weather the storm — what is important for investors is their ability to stomach volatility in small & midcaps.

We would recommend selective mid-cap plays via PMS managers who have historically demonstrated their ability to identify solid and sustainable businesses.

At an overall portfolio level, we would like to maintain a large-cap bias in this market.

When will the market bounce back? Some experts say that recovery in commodity price could help markets recover. What are your views?
A) While India has seen a healthy economic growth recovery post Covid, higher commodity prices can moderate it going forward onwards.

Higher inflation may also dampen the initial positive trends of private consumption. Hence, we feel that a sustained rise in commodity prices may not be in the country’s interest.

Markets would be closely tracking how commodity prices behave.

Is the market expensive at current levels? Is Nifty50 expensive at 16K or was it more expensive at 18K. PE has come down towards 20x – a level seen around March 2020.
While the Nifty50 at an overall level seems fairly valued, we need to be mindful that the index averages may get skewed because of the valuations of select index heavyweights.

Many stocks beyond 10-15 Nifty companies are trading significantly away from their 52-week highs. So, while Nifty50 might paint a different picture, there might be opportunities beyond these companies which investors need to watch out for.

Any rules which one should follow when selling a stock amid a double-digit fall seen in the Nifty50?
Before investing in any stock, an investor must first decide on the intent – whether it is strategic/long term or for trading/short term play.

Any trading calls should be with strict stop losses. If a long-term holding is down significantly, an investor needs to reassess the thesis of making that investment.

If the thesis still holds good, then he/she can hold or buy more of that stock or else buy another company with a fresh thesis.

What is your call on the rupee? Will the currency continue its down move against the USD? Is FII selling related to currency depreciation?
Like most other currencies, INR has been under pressure vis a vis USD. We feel it might continue to be under pressure going forward onwards.

What is though comforting is that the RBI has built huge dollar reserves which it can judiciously utilize in the event there is heightened volatility in currency markets.

Where are fund managers placing their bet as most stocks are available at a steep discount compared to what to a month back?
Fund managers seem to be value buying in this dip. Managers were favouring value stocks over the growth stocks in the past 3-6 months.

While mutual funds have portfolios that are more benchmark hugging, we have seen PMS managers delay buying in their preferred choice of stocks for want of better pricing opportunities.

Are you suggesting your clients to hold on to cash or deploy at current levels?
This is a very client-specific call for us depending on expected cash flows and the risk appetite of the investor. We use our Inhouse developed model – Cervin Market Confidence Index (CMCI) – to balance our ‘dry powder’ which is customized for each investor.

For some client portfolios with higher cash allocations, we have utilized current volatility to deploy into equities. At an overall portfolio level, our bias continues to be to maintain decent cash levels.