Retail investors now the smart money, HNIs more prone to panic: Sandeep Tandon

"I can say with good amount of confidence, at least till 2047 when demographic cycle peaks out in India, till then India PE multiple remains elevated for maybe you are talking about another 22 years or so, so it is more than 16 years I am saying that India multiple remain highest, which means earnings will expand but PE expansion is very important. So, as long PE remain elevated, the probability that you make good returns from the market," says Sandeep Tandon, CIO, Quant Mutual Fund.

We were just reminiscing in the last 16 years the markets have seen so much. The world has seen so much, yet you have made just phenomenal returns. If you just did nothing, that is all you had to do.
Sandeep Tandon: Correct.

Are the next 16 going to be like that?
Sandeep Tandon: It is very difficult to visualise exact 16 years. But if I have to look at India, there is a very interesting data, I will show you, like a lot of people forecast earnings, what will be the earnings for 5 years, 10 years perspective generally look at in numbers. We as Quant from a behaviour perspective we try to forecast the multiples. How we define multiple? Through perception, analytics. It is again interesting thesis which we have built, India perception has changed, something has dramatically changed in last few years. And if I have to say that India perception has changed and which means the PE multiple of Indian stock market will remain elevated from longer term perspective. I can say with good amount of confidence, at least till 2047 when demographic cycle peaks out in India, till then India PE multiple remains elevated for maybe you are talking about another 22 years or so, so it is more than 16 years I am saying that India multiple remain highest, which means earnings will expand but PE expansion is very important. So, as long PE remain elevated, the probability that you make good returns from the market.

Last 16 years we have had magical moments -- jam trinity, financial inclusion, made in India, startup, Maha Kumbh. Which really could be the big factor at play, what could be that secret ingredient or secret sauce which in a sense will bind Indian market forward?
Sandeep Tandon: I think what has changed in last maybe, if I have to say in this Modi's decade, it is about same thing, India perception. The young people, not only their risk appetite is clearly visible, they believe they can demonstrate few things. The neglected people, they are coming back and that is a big force to reckon.

Like, people talk about China is about their government, they are doing it. Here the entrepreneurship and we are seeing for the first time this level of entrepreneurship even from the institute, people wants to start their own companies not join the companies, so that is something has changed.

And financial inclusion has played a very important role in this whole journey. I will say even 2020 remember as a covid issue, but something got changed in 2020. A lot of people were sitting at home, first time they analysed their investment and actually the expenses was not there, I think that was a change moment where people started focusing on investment and the wealth got created.

Now, that that M2M gains which retail investor sitting is very meaningful and that is actually driving. So, I always say every bull run is driven by some leadership, this time leadership is retail and retail base is very large. So, if you can say maybe a decadal opportunity from a returns perspective, maybe we have seen just five years or so for the current decade.

Since you are so much into psychology of the markets and market participants, retail also comes with panic. Retail also comes with every news flash and reacting to every news flash. I am not talking about the mutual fund corpus money, but I am talking about more active participants.
Sandeep Tandon: I always try to refer, this is some interesting work which we have done, when you talk about retail investor, it is actually jumbled up. Anything which is in non-institution is considered as retail actually. Actually, it is not. You have to differentiate that component from a HNI, family office, ultra-HNI and I always said that we can always see exactly at the bottom of the cycle, actually they are buyer, they are not getting panic. Who is getting panic? The people who are doing business. When I differentiate investor versus business, anybody who looks at their M2M on daily basis, for them this is the business and hence even market fall 10% if they believe that market can fall another 10%, they will exit, where retail investor is not.

So, you have to differentiate the type of investor. Investor do not panic so easily. BUT somebody is doing business, which is the case for large family office, ultra-HNI, and HNIs, that segments panic. If I have to see, look at in last one year redemptions at our end, just do a redemption analysis, majority of the money if I have to say, if I say, maybe two-third of my redemption is coming from HNI and family office; only one-third comes and that also very interesting within one-third majority of redemption which coming from real retail investor is come from direct line not through regular route, they also need handholding.

So, what is the mood in the market right now because the news flow, the noise around geopolitics, domino effect on crude, tariffs, it is so high. But if I just look at the index in the last 28 days, the index has done nothing. We have moved in just a 600-point band.
Sandeep Tandon: So, one way of looking at the turmoil or geopolitical volatility. Other way of looking at, look at we have seen India-Pakistan tension, we have seen trade war, we have seen now Middle East issue further escalating. Market has actually given you some positive returns. And the confidence is coming back. If you really look at September, October, and particularly January, February first quarter where some amount of capitulative move we saw in the market, I think that is changing and confidence is coming back and then market realised that India is the most safest place. In fact, three months back we made this call not only from India, India is a risk-on rally and globally is a risk-off.

But what is very important is the decoupling process for India has begun. We believe India has now decoupled from global market, that is a cycle which we have been talking about in 2025 it begins, and we have seen now the decoupling process has begun.

You look at the impact what happened in the US market, we are hardly any impact out here. And the turmoil which we are seeing, the first country used to get affected purely from a crude perspective. And if you really look at this time also, crude has also spiked very recently, it has only because of very recent phenomena we have seen the impact. Otherwise, crude also has been pretty stable.

So, we are jumping from long-term to short-term. We have got a short-term view. Let us talk about the long-term view. Long-term view is that the PE multiples will remain elevated. India becomes what could be called as a special situation stock. What could be the next aha thing for India? For example, coming back by the SIP investor has been the aha moment. Digitisation has been the aha moment. Make in India has been the aha moment. What is the next aha moment for India now?
Sandeep Tandon: Very difficult to visualise in at this point in time, but only thing the way I look at from a regulations point of view, sebi has include the, we can talk about our industry, sif, the specialised investment fund, a new category. And obviously it is like we were the first to get that approval, but what is very important is that new segment is coming where it really help you from a diversification perspective.

Like globally when you talk about hedge fund criteria, people trade or the prop desk or the high frequency algo, with route a short-term investment thesis will also gather momentum that is how you can make money in the short-term perspective also, how you better manage your returns also, how diversification through sif route also you can create better risk adjusted book.

So, new instrument which is coming, which is not the case… Let us say some of these instrument was the part of only the HNI, family office, or the large ticket customer, I think now real, real retail customer will also be able to participate through SIF route and some more products will come.

So, I am more excited that you will see innovation coming through product. Technology is obviously playing a very important role. Cost is coming down drastically.

And what is very important when I talk about perception has changed, India, like people, retail investors are more convinced this time and I am saying they have become much more mature than as compared to what I have seen in 10, 20, 30 years.

This time something is very different. Retail has not panic. If you really look at, they are not getting capitulated so easily. It is the more sophisticated investor they are panicking much earlier because they are more smart and they are more educated and leveraged. So, it is a phenomena something which we have to really respect the real retail investor is coming and they have patience now.

So, what falls into your buy and hold category for next five years, 16 years is a long time, for next five years?
Sandeep Tandon: Yes, I agree. So, five years let us say given the geopolitical turmoil, we also believe that beginning of the year say next five years also going to be challenging from a global perspective. Hence, I like to be more focused on the domestic economy. So, power is the theme. Power remains buy on dips. It is a decadal opportunity. So, if next five year, I think by 2032, power stocks should do well. All energy basket should do very well.

Then, I will more bullish on the India infrastructure space, not just EPC companies, large infra plays whether ports, airports, even you can say EPC company, also large infra names which should be a biggest beneficiary because we have seen irrespective of state government also the infra spending has not cut down.

I think we are in a massive investment phase in India, so that is a space which we like. And obviously if infra does well, then logically materials should also follow. So, I am saying first infra. And consumption as a theme is also coming back. The tax benefit which government has given, the RBI recent cuts will also boost the consumption.

So, a lot of consumption stock which have been neglected territory or they were erstwhile admiring territory stock, those are the names one should look at. Hospitality space we still like, whether you talk about hotels, hospitals. So, those are the area. Services industry also.

We want to see something new now. Like all those names which has been in admired territory for last few years may or may not give you that sort of returns going forward, so I will look for under ownership, I look for attractive valuation and research or I say uncovered.