How To Beat Market Volatility? Vikas Khemani And Rushabh Sheth Explain

The best strategy to beat the volatility and uncertainty in the market is to focus on the longer horizon, according to market veterans.

There is always some uncertainty while investing and there is no doubt that the global macro set-up—especially the developed markets—is not so great, Vikas Khemani, founder of Carnelian Asset Management and Advisors Pvt., told BQ Prime's Alexander Mathew. 

When you focus on a short-term horizon, there is always a worry factor, he said. “My only suggestion is to zoom out and not to focus on the short-term. There are enormous opportunities in the longer horizon.” 

Khemani is optimistic about the market and doesn't see any risk in it. “If there are major developments in the developed market, we might see some temporary correction, but structurally there are not many risks.” 

"Having seen this (volatility) for the last 30 years, we know that there will be constant change," said Rushabh Sheth, founder of Karma Capital Advisors Pvt. "We try and ensure that we are focusing on companies where the underlying management is continuing to execute well on the ground level."

India is a growth market, and if businesses are growing, investors will get their share of returns, he said.

Khemani concurred with Sheth, and said that India is in a transformative phase and growth over the decade will be phenomenal.

Despite being a promising market, India is quite underrepresented in the global portfolios, according to Khemani. “Over the next couple of years, massive capital inflows could come into India once the dust settles down.”

Both Khemani and Sheth said the ‘India story’ is not yet over. "The environment is going to remain a little bit challenging, and we will all have to navigate around it," Sheth said.

There has been a significant change in the valuation of small companies after Covid-19, and it poses a major concern, according to Sheth. Caution is warranted in these companies, while the biggest delta in valuation happened because of the huge retail inflows from mutual funds, he said. 

Smaller companies will find the constant change in the environment challenging, which is visible in the second quarter numbers, Sheth said. 

However, at the market level, Khemani said the valuations are not stretched. “There are pockets where overvaluations are there and will always be there and we will have to avoid them." 

Khemani considers the banking and financial sector to be promising, with interpenetration and strong fundamentals, while Sheth expects the healthcare space to be the biggest beneficiaries of the growth story.