Sundaram Mutual CEO Anand Radhakrishnan says stock market may see bit of churn and consolidation in next 3-6 months

It depends on how one interprets the election results. One may say, it is just an election arithmetic gone wrong in few States and so it should not be seen as a broad view of economic policies going wrong. Government expectations in key States such as Uttar Pradesh and Maharashtra have gone wrong. A person few may feel there is possibly a message that the government needs to re-calibrate its economic policies. I think, the reality is a bit of both. It is not just some arithmetic going wrong but there is also a hidden message. The coalition government cannot be driven by a single political party’s agenda. A common minimum program equivalent needs to be worked out. The new government has to fuse the election manifesto of a few of its coalition partners and come up with an action plan. We should expect some calibration on policy priorities going forward.

Markets were on a unidirectional way up driven by specific areas such as infrastructure, government spending and capital investment by private companies. While the underlying fundamental trend may continue to remain strong, the market may take a breather. The government may continue to spend on infrastructure, but they may have to allocate more money for social programmes to incorporate the message from voting public. This why the market is changing colour a little bit and consumption-oriented names are slowly coming back. The next 3 to 6 months are going to be a bit of churn and consolidation in the market. Though, in the post-election speech, the Prime Minister has not hinted at any change in economic policies, I think practically speaking it will go through some calibration.

Reforms need to be more diverse and look at many other verticals. For instance, our healthcare systems may need a lot of reforms and the agricultural sector also needs more attention with an intent to benefit farmers. It may not just be making India competent in manufacturing against China to attract global investment but focus on many people-facing areas. Some of the pet reforms may have to wait. For instance, the Uniform Civil Code and bullet trains may have to make way for say, agriculture reforms. Few social reforms need more consensus building and may not be a priority. Coalition needs will refocus on areas that are important for other partners too and hence careful consideration needs to be given to other areas too.

Markets have done phenomenally well. Even without the election outcome, fund managers have to exercise caution. Each one has an optimistic and bullish view. Short- and medium-term returns have been above long-period averages. Therefore, it is better to have a much more tempered expectation. Earlier, investors used to be happy with 13-15 per cent of returns but in the last couple of years even a 35 per cent return looks like an underperformance for investors.

The structural part of the fund flow will remain. Just like savings, investing has also become a habit. I do not see a big dent in that. On the other hand, there are momentum-based flows. People who otherwise would have, say, purchased a house may have deferred it to invest in the market to buy a bigger house. So many people do different things to make short-term returns. That is why retail activity had ballooned. With people buying stocks directly, the number of broking and demat accounts have gone up. Everyone wants to make hay while the sun shines. We should expect some moderation in this behaviour going forward.

The valuation of run-away sectors such as industrials, capital goods and manufacturing will cool off. It is a good thing for investors because valuations were very tight. The fundamental trend is to remain the same with some moderation of growth in core sectors and improvement of growth in the consumption sectors. Ultimately, people measure their well-being from their ability to spend and not so much as to invest alone. Boosting discretionary consumption and agriculture-related engines should be the focus. Getting back demand for the affordable segment in each sector is also crucial. If you look at value product manufacturers in footwear and garment have not done well. Maybe these companies may find some favour along with existing luxury brands.

We are a mid-to-small sized AMC. The industry is going through increased competition because of more people getting asset management and PMS licenses. We have seen fragmentation of market share across the board. Simultaneously we are also seeing consolidation. People are willing to sell out businesses which they cannot scale up beyond a level. So, we feel there is space for mid-sized AMCs which can manage money in a quality way. We can deliver consistent outcomes for investors despite being mid-sized. We aim to be a dependable partner for investors’ long-term investment needs.