Amitabh MohantyMD and CEO JM Finance Mutual funds India believes that it is on a multi-decade growth path and the impact of global economic recession can be limited in the country. In an interview with Mint, Mohanty shared his views on the markets, the economy and the sectors he sees as promising.
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How should one invest in this market? Most positives such as economic growth, corporate earnings and the end of interest rate hikes have already been discounted.
The investment process remains the same for most investors. A disciplined asset allocation can deliver results after proper analysis of risk appetite and duration of investment.
India is a stock picker’s delight. Regardless of global or domestic macro, sound analysis will always reveal good stock ideas.
There may be some hiccups in the interim, but the Indian story unfolding over the next two to three decades could surprise everyone.
However, investors should factor in the uncertainty and volatility in the markets and be prepared to hold positions during difficult market periods with appropriate size and exposure.
What is your view on the current market cycle? Is it near its end? Do you see the possibility of a bear phase anytime soon in the market?
We believe that it is always difficult to call the beginning or end of market cycles. We look at the results from a probabilistic perspective.
Today we are in a very unique situation because the domestic macros look very promising, but there are headwinds from the global macros.
We are very aware of emerging macro risks globally due to various factors and prepare our portfolios accordingly.
We do not specifically call markets bull or bear to orient our portfolios.
As a process, we continuously evaluate our portfolios and subject our exposures to value and margin security tests.
Our endeavor is to try out value pockets based on our models and orient our portfolios accordingly.
Will rising crude oil prices and poor monsoons hamper India’s economic growth? How might these factors affect the domestic market?
A poor monsoon and rising crude oil prices will certainly create headwinds for our markets, but I think our buffer food stocks and effective supply management will mitigate the impact.
Also, better irrigation infrastructure in our grain baskets has reduced the impact of monsoons.
However poor monsoons can affect rural consumption and overall demand and growth.
Crude prices are a definite concern from an inflation and currency perspective, so it’s something that needs a close watch.
However, this will lead to greater adoption of electric vehicles (EVs) in the country.
From a long-term perspective, better road infrastructure, intra- and inter-city, creation of mass transit systems in growing cities, dedicated freight routes and ethanol blending will reduce dependence on fossil fuels going forward, which will be a huge boon. For the country.
Are you worried about the impact of global economic recession on India?
Not much.
In all probability there may be a short-term setback, but with domestic macros very well shaped on many fronts and rising geopolitical uncertainty globally, India seems to be increasingly positioned as an oasis of peace and growth.
Therefore, India can continue to receive global capital allocation, which will lead to decades of growth here.
Given the growing popularity of digital platforms, how has technology affected the distribution and accessibility of mutual funds in India?
Digital platforms are a boon for the distribution/investor fraternity and AMCs. With the benefit of these platforms and their global accessibility, the small distributor and investor can now access these tools from the remotest part of the country.
This has led to massive democratization of mutual funds and the growth of AUMs (assets under management) and portfolios of the industry has been a happy outcome. This indeed paves the way for increased financialization of household savings going forward and bodes well for the Indian economy.
In fact, at a very microscopic level, every mobile phone, laptop and tablet functions as a branch of the mutual fund industry. This will build momentum going forward and ensure that more distributors and investors become a part of this journey.
What are the key factors driving the growth of the mutual fund sector in India and how do you see these factors shaping up in the future?
There are several key factors driving the growth of the mutual fund industry in India.
Increasing awareness of equity as an asset class, financialization of household savings and steady movement away from traditional asset classes like real estate, albeit slow, ease of transaction through technology and digital ecosystems, and last but not least the outstanding role of our mutual fund distributors. The mile handle of retail investors, and our regulator, SEBI, ultimately plays a vital role in reducing the probability of accidents, both intentional and unintentional, through transparency, disclosure status and proper regulations.
As the industry matures, investors are offered more strategies and options, ranging from very simple to somewhat complex, and they have a lot of choices based on their risk profile and target asset allocation.
As India matures as an economy, these trends are likely to deepen and expand in the future, despite short-term blips.
It is up to us as industry players to show our responsibility and commitment to drive these trends.
The Chinese economy is in the news for all the wrong reasons. Will China’s weakness mean more FPI inflows to the Indian market?
China has its own cycles and handles them in its own way, sometimes more successfully than others.
While India has benefited and will continue to benefit from the China plus one scenario, our belief is that India remains an attractive destination not only from a relative sense but also from an absolute sense.
India is taking many changes that will ensure that we attract global capital in our own right and not because of the fortunes of another economy.
What would be a suitable portfolio for a two to three year time horizon? Reduce exposure to equities?
There is no right or wrong answer to this. Ideal portfolio is a concept unique to each investor based on his risk appetite, life cycle stage, investment surplus etc.
The best portfolio is actually one that allows you to sleep well at night throughout market cycles. We can only advise that a proper asset allocation that allows for ups and downs and appropriate investment horizons will keep most investors in good stead.
In what areas are you positive for the next two or three years?
We are dynamic and data driven in our field selection. We like to follow earnings growth and cash flows when allocating money between sectors and stocks. As things stand, financials, autos, capital goods and export-oriented manufacturing businesses look promising in the medium term.
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Disclaimer: The views and recommendations above are those of the expert and not of the Mint. We advise investors to check with certified professionals before making any investment decisions. Mutual fund investments are subject to market risks, read all scheme related documents carefully.