Brushing aside concerns over market volatility, Ramanathan K, Chief Investment Officer (Equity & Debt) of ING Investment Management (I), is bullish on Indian equity market.

He believes that a deficient monsoon will have only a sentimental impact and investing in mid-caps makes more sense at this point of time.

In an interview to Business Line , Ramanathan spoke of the various factors affecting the markets and what retail investors need to do to overcome the volatility.

What are your views on the markets?

We continue to be positive. Markets are pretty much range-bound, driven by multiple factors. Looks like things are better than what they were six months back. In terms of what is happening around the globe, we need to still wait and watch whether it will develop into a crisis.

Near-term negatives include the monsoon. It is more a sentimental impact. It will lead to hardships for people but from an economic growth perspective, it is not going to result in a tail-spin.

But we have already seen monsoon impacting sectors like auto.

I would attribute the auto slowdown to the general economic slowdown.. Two-wheelers and commercial vehicles had already slowed down before the monsoon. SUVs and utility vehicles continue to do well.

Tractor sales also had already started faltering before the start of the monsoon. Obviously, agricultural lending is there and there will be stress on priority sector lending. However, overall the impact on credit growth will not be very significant.

What are the positives that you see for India from the Europe situation?

One positive is that global commodity prices will continue to remain soft. So you will have short-term rallies. We do not have a crisis situation. In a crisis there is no question of valuation as people will just want to hold cash.

As a fund manager, how do you hedge your position against such an uncertain market?

Our job is not to give absolute returns in equity funds. Our job is to beat the benchmark. Suppose, we manage equity funds, our aim is not to give absolute returns, but beat the benchmark. In the equity market, it is a high-risk, high-return game.

So there we will tilt our portfolios. For example, today we are underweight on metals because metals are more sensitive to global slowdown. We are underweight on the IT sector which can be hit because of slowdown in the US and Europe. So, our tilts in the portfolio reflect our worries. When stocks get beaten down, you need to review your underweight stance.

What are the sectors that you are looking at right now?

As of now we are running a sector-neutral portfolio. We are not taking large calls in any particular sector except two sectors where we are underweight — metals and IT. We are trying to add alpha (incremental return over benchmark index) through stock selection.

The short-term direction of the market is extremely difficult to predict. At the same time, at current levels, I do not want to maintain high levels of cash. We are focussing more on mid-caps and are overweight on mid-caps across our portfolios compared to the benchmark.

For an investor, what would you suggest — equity or debt — now?

First, the investor needs to decide on the asset allocation. Asset allocation is a scientific exercise. One needs to understand the investor’s income, wealth, inheritance, future plans, cash outflow and risk appetite.

> sneha.p@thehindu.co.in

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