The global markets appear to have stabilised and that has boosted share prices in emerging economies like India. The Budget was also a positive for the markets, as the Centre stuck to the FRBM path.
Speaking to Bloomberg TV India, Kotak Mutual Fund’s Head of Equities Harsha Upadhyaya sounded a note of caution, saying the worst is yet to be over and the volatility in the markets is likely to continue for some more time. There is a chance of another rate hike from the US Fed in the next couple of months, he said.
About a week back, I think there was too much of pessimism just around the Budget and the likely introduction of the capital gains tax. There was also anxiety in terms of what the government policies would be.
Along with that, the global markets were also quite weak at that point of time. Post Budget, there has been some amount of stability in the markets until today. If you look at the currency, commodities or equities, every market has stabilised a little bit over the last seven to 10 days. I would say that India also participated a little bit in that trend.
Now the global cues are once again turning negative. So I don’t think the worst is over and we will continue to see volatility through the markets for some more time.
How has been the money flows to institutional investors from the retail side? If you get enough money there is more money to be put into stocks and then they have the momentum of their own…
It has reduced to a certain extent over the last two-three months. But it’s not something very alarming at this point of time. The SIP flow continues to be very strong and that’s a decent amount of money.
The industry is getting about ₹2,700 crore of money every month.
So to that extent, I would say that there is nothing that is really worrisome on the flow side, at least for the domestic mutual funds as of now.
Do you expect another rate hike coming, say, by the middle of the year or do you see that as a limited possibility for now? If there is another Fed rate hike earlier than expected, will it impact capital flows into emerging markets?
Yes. It is a possibility that we will see another rate hike from the US Fed in the next couple of months. But our belief is it’s unlikely to be a very big concern for the markets since most of the market participants believe that there is going to be a hike and the market is kind of prepared for such a hike. In our opinion, the bigger concerns could emanate from Chinese growth slowdown and the associated currency volatility rather than the Fed rate hike.
From a perspective of momentum in stock prices, where would you be at the moment? Where do you see the maximum appreciation coming in? Will it require a rotation of some of your portfolio?
We are continuing to hold some of the investment themes that we have bet on. It’s clearly become a very narrow market. So to that extent, there is no real sectoral trend. Even within the sectors, stock performance has been quite divergent for the last several quarters. So it is likely to be that way since earnings growth is not been uniform in any of the sectors.
Our belief is — let’s be in sectors and stocks that are showing a reasonable degree of steady earnings growth. And until you see a broad-based recovery in the economy, these are the sectors and stocks which will perform well because that is where the profitability and cash flows are there.
So let’s be in those set of stocks — that’s been our idea of investments as of now.
And we will stick to it as long as we see clear cut recovery in the economy.