Not bullish on equities; going with 50:50 allocation: Siddharth Vora

What has been your portfolio strategy? How are you dealing with this volatile market, how are you dealing with money market cues?
We have an equity strategy and an asset allocation strategy. Overall the construct on the asset allocation is that we are not bullish on equities as an asset class while we are bullish on India and the economy and how the recovery is really panning out.

But in terms of the variables we track to get bullish on equities as an asset class, we find that whether it is global macros, monetary, overall valuation comfort or technical risk reward, the picture is not very bright for equities. We are going with a 50-50 approach in terms of equity and non-equity exposure and in terms of our equity focussed strategy, the broad sector calls in terms of being overweight and underweight in certain sectors, that phase is behind us.

It is time to focus on stock selection because all the broad themes where growth was highly visible for the near term, seem to have been priced to perfection and it is about identifying some niche areas whether it is within pumps, hotels, capital goods or defence. These are some areas where growth visibility is very high but it is now down to identifying which business you really want to own within these spaces. It has been volatile of course but our asset allocation strategy has been smoothly riding this volatility.

50% cash is what you are sitting on. From June’s low, isn’t that risking a lot of underperformance?
That is so when we take cyclical calls in terms of asset allocation where we only invest in index funds and ETFs across different asset classes. We cannot play every tactical move but we were at 36% equity. We increase that to 48% at around 15,700 levels. So yes, we did increase our exposures to equity but we are still not able to go beyond 50% at these levels.

The strategy depends a lot on how the model is interpreting, how the variables are panning out and how we are actually guided by the quantitative model to do asset allocation and we usually do not take any active calls as such.

Despite the run, does the auto space warrant a fresh look and is there more upside from the current levels?
Within the broader auto pack, in the PMS that we are running, we have been bullish on Motherson Wiring since quite a while, almost since it got demerged and we continue to maintain and ramp up our allocations in the wiring harness business given its tremendous resilience whether EV on non EV. That coupled with the strong market share that Motherson has with superior free cash flows, ROEs make us believe that it is a story to be parked within the auto space.

We are selectively bullish on auto. We can see some sort of consolidation within the auto pack but the growth visibility amongst the big sectors – IT, pharma, FMCG or auto – is pretty much leading the pack in terms of growth visibility. Of course, the debate around valuations will start creeping in when it comes to taking a fresh look at auto, but if the view is longer, I would prefer auto ancillaries to OEMs.