DSP Investment Managers expects the slowdown in economic to hit the market in the near future even though the long-erm growth potential of the country looks bright.

At present, while central banks are prioritising inflation over growth at the moment, there are signs that inflationary pressure may be decreasing, said the fund manager. The market might not be considering the possibility of a slowdown in growth enough, and this could lead to further downward revisions in the near future, it said.

Moreover, multiples for Indian markets are high as the MSCI India Index is trading at 21 times forward PE,  and returns from these levels have been moderate in the past, it said.

While it is natural to speculate on the future movements of commodity prices, central bank policies, liquidity levels and the Covid impact, DSP said it is important to recognise that these factors may not have significant bearing on the success of most investors.

Instead, it said investors should maintain discipline and accept that higher equity returns come with a certain level of volatility.

Despite potential short-term challenges, DSP Investment Managers is confident that the country’s structural turnaround is being accelerated by several factors, including de-leveraging by corporates, increased capacity utilisation in the manufacturing sector, government investment in infrastructure and a well-capitalised banking system.

Vinit Sambre, Head, Equities, DSP Investment Managers, said while it is not prudent to exit the equity asset class when valuations are high, it is important to be pragmatic and recognise that future returns can be lower when an asset is purchased at a higher price than when it can be acquired at a lower price.

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