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Investors should brace for volatility going ahead and usually IT, pharma and FMCG tend to do well when there is volatility, Nikhil Kamath of True Beacon told Mint. Talking about new-age tech stocks, he said he wouldn't bet on them.

Meanwhile, in a bid to ramp up investment portfolio for UHNIs (ultra high networth individuals) and family offices, True Beacon has recently onboarded a new general partner and co-founder, Abhijeet Pai. He joins the founding team members Nikhil Kamath and Richard Pattle at the wealth management firm. Abhijeet Pai is a second generation entrepreneur, a part of the family behind the Puzzolana Group. Pai and Nikhil Kamath also co-founded Gruhas Proptech in 2021.

In an online video interview with Mint's Rakshita Madan, the three of them talked about the opportunities in Indian equity and private capital markets.

Here are edited excerpts from that interview:

Q. There are concerns around the globe of a possible slowdown or recession in 2023. Is that a concern for you? Also, how do you read the market being at high amid such fears?

Nikhil: So I'm quite the skeptic. I feel at 21-22 times the one-year forward earnings, considering what's happening across the world, we are definitely in frothy territory. I think one could argue Europe is already in a recession. American definition is two consecutive quarters is minus 1%, which will probably happen in the next quarter.

While India might be far off from recession, in a pure definition, kind of way. But I think if you were to look at the inflation and the growth rate, and you know the GDP numbers came out last week at 6%. I feel like a little bit lower, it would feel like a recession.

So I think markets are expensive. But I have felt that way for a long time now and I've been wrong because the markets continue to go up. So maybe I'm somebody who looks at the glass half empty and most others are looking at the the same glass and they are seeing glass half full.

Q. The stocks of new-age tech firms that got listed recently have been very volatile. What in your view is going on with those stocks? Any of them that you feel are a value buy?

Nikhil: I wouldn't buy them.

Q. Before we talk more about secondary equity market in India, Abhijeet, could you tell us what would be your role and which direction will you take True Beacon into?

Abhijeet: My core purpose would be HNIs and family offices, the intention would be to bring in private deals and syndicate partnerships, and look at some unlisted capital and so on. So we'll add to the suite of products that True Beacon already offers. So we'll be more of a holistic product portfolio on the wealth side with this edition.

Q. Richard, how are Indian markets looking for foreign investors?

Richard: India outperformed many of its global competitors, whether it's in the US, UK, France, Germany, Singapore, Hong Kong, by between 10 and 45%, over the last 18 months, and that's a great testament to the equity markets here. And I think, quite attractive for international investors.

We, at True Beacon, are actually trying to mobilize some of these international investors, who want to invest into India, and always typically been looking at another, you know, key neighbour of ours in China as an investment destination and try to bring the equity capital markets story of India to life.

But family offices are also looking at private opportunities in India.

Q. Nikhil, which theme are you expecting to work in the Indian markets in short to medium term in the coming year?

Nikhil: I wish I knew. But generally, I think when markets get tumultuous, what is expensive, gets hit hardest and what is cheaper does well so if I have to go by history, I would say you know, maybe IT, pharma FMCG these are the sectors which tend to do well when there is volatility, but all this being said, most of the funds that we run are hedged.

If there were to be volatility, we're kind of like, going to be better off than our competition, which is out there. A lot of funds in the market are vinalla only, long only kind of funds, which kinda like, you know, bet on companies going up all the time. We bet on relative value, and we bet on you know, stronger companies doing well and bigger companies underperforming all the time with a hedge. So we do best in times of volatility.

And if you were to ask me to make one prediction, I think there is volatility ahead. And I think we have situated ourselves to do well under that circumstance.

Q. Banking as a sector has been performing very well. Is it the peak or do you expect the up move to continue?

Nikhil: There's no way to know if it's a peak, but they have run up a lot. They've run up more than more than mid caps, they have run up a lot more than Nifty. The one thing I would say is a lot of people are telling me today that even though the market is almost at what 19,000, their portfolio is not reflecting that. But I think the broader markets have lagged a lot.

You might see frontline numbers of these 30 or 50 companies, which are looking higher than we have seen in the past. I think the broader markets have lagged quite a bit. So maybe the next opportunity could be there.

Q. Abhijeet, in private capital space, what sectors do you think UHNIs can look at in India?

Abhijeet: In long term, I think India will become a manufacturing hub for for a lot of products. And the government will actually be signing some interesting trade agreements. Also, you know, the IT industry, India is really the Rolls Royce of the IT industry. I think the core tech products will keep coming, we will see new, interesting SaaS innovative businesses, and those are the ones to locate. So I think the key for us would be to look into businesses which are profitable, and try and find them early and probably participate in them.

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