Gulaq portfolios follow Estee’s proprietary multi-factor methodology. These are quantitatively managed and follow a directional strategy. Estee is a quant-based investment management company founded in 2008 when SEBI permitted algorithmic trading in India. Gulaq is Estee’s investment advisory arm, focused on creating model portfolios and robo-advisory solutions for the mass retail market using well-defined algorithmic processes.
We sit down with Vivek Sharma – Head – Investments @ Gulaq, to discuss his views on markets, macros, valuations and favourite sectors!
What do you make of the current global scenario?
Structurally Indian markets look very attractive. They are falling because of the inflation problems in the US and are now increasingly evident in Europe as well. Although there is a strong decoupling theory going around that Indian markets would keep rising even if global equities are selling off. This seems unlikely, but we are very well placed on a relative basis. Day by day, the probability of the US & Europe going into recession is increasing, and India can’t remain immune.
Is it a good time to enter the markets from a valuation perspective?
Valuations-wise, we have entered a very attractive range, our PE ratio of NSE500 stocks is about 20, about the similar levels we saw in the covid related fall of 2020. There have been more than 100% growth in the EPS of these 500 companies in the last 3 years. Similar numbers for S&P500 stocks are about 32%. So relative to the US and Europe, we are very well placed and would do well, but we don’t take a view on an absolute basis.
Is FII flow a cause of concern for Indian markets?
August was the 1st month in 2022 when we saw FPIs coming back with good buying. This month has been positive till now, but the tide seems to be turning, and our expectation is that we will see net selling over the next few weeks by FIIs.
Are we headed towards a global recession?
Globally things are not looking good. There has been a downwards revision in every major economy, be it the US, Europe and now China. China’s deepening real estate crisis is starting to spill over globally. How well the Chinese government is able to control it remains to be seen, but till now, we haven’t seen any signs that the Chinese government has things under control.
Both in developed and emerging economies, global inflation has been revised upwards due to food and energy prices. The revision is significant, about 0.9%.
There are too many things, due to which the risks to the downside are more probable.
Which sectors are you currently betting on in Gulaq portfolios?
We are bullish on the consumer discretionary, consumer staples and industrial sectors.
These companies also tend to be good dividend payers. These 3 sectors have less than 30% weight in BSE500 stocks, but we have about 85% allocation to these three sectors.
We are underweighting on financials and IT sector.
What makes your investing style different and value add?
Since we follow a purely quantitative approach and consider both technical and fundamental factors, we have allocated to a few Adani stocks in past (1, 2). Those WealthBaskets that are discretionary in nature tend to give more weightage to fundamentals, and hence they have missed out on the strong performers because of the not-so-good fundamentals. We, however, look at the stocks much more dispassionately and hence have been able to outperform the markets consistently.
