In an interview with ETMarkets, Sambre who specializes in the small and mid-cap space and has over 20 years of relevant work experience, said: “In addition, higher fixed income yields in the US may draw investors with lower risk appetites,” Edited excerpts:
With geopolitical tensions increasing – could this lead to another selloff in equity markets and a rise in Gold? How should long-term investors approach this – good time to build the portfolio?
Geopolitical tensions can certainly have an impact on all asset classes. When there is uncertainty and risk in the global geopolitical landscape, investors may become more risk-averse and seek safe-haven assets like gold.
However, it’s important to note that geopolitical tensions are just one of many factors that can impact the markets.
Economic indicators, company earnings, and other factors also play a significant role in determining market performance.
For long-term investors, it is generally not recommended to make drastic portfolio changes in response to short-term events like geopolitical tensions.
Instead, long-term investors should focus on building a well-diversified portfolio that can weather various market conditions.
One effective strategy is to invest regularly in a mix of different asset classes, such as stocks, bonds, and gold, through a systematic investment plan. This approach helps to mitigate risks and smooth out volatility over the long term.
Overall, while geopolitical tensions may lead to short-term market fluctuations, long-term investors should remain focused on their investment goals and stay the course with their portfolio strategy.
What is your view on the proposal of extending market hours for the equity segment? What according to you is good, bad and ugly if the proposal is implemented?
Extended market hours can offer the advantage of improving market liquidity, which would help in better price discovery.
Moreover, many global stock exchanges operate for longer hours, so extending market hours in India can align the country’s equity market with international practices.
Additionally, longer trading hours may provide greater opportunities for investors who are unable to participate during regular trading hours.
However, a possible downside is that increased trading time may result in more price fluctuations, leading to greater market volatility.
Furthermore, it could also necessitate heightened regulatory oversight to ensure compliance with trading rules, monitor market manipulation, and prevent insider trading.
As the market retested Budget lows – what are the near-term headwinds which the equity market has to battle in the near term?
The Indian equity markets are vulnerable to risks arising from high inflation and the global economic slowdown.
Inflation has reduced consumer spending, particularly among those at the lower end of the income spectrum, which could have some adverse impact on corporate earnings.
Additionally, global economic conditions could cause a ripple effect in India, leading to a negative impact on the equity markets. However, our reading suggests softer inflation reading going ahead which is a bit reassuring.
RBI could do another round of rate hikes before a pause. What are you suggesting to your clients in a rising interest rate scenario?
A number of inflation drivers are already indicating a softer inflation reading ahead. Government finances are also more benign in FY24 in comparison to what was expected by the street. This means that interest rates are in the process of topping out.
We believe that with a 17-month sideways correction already behind us and markets approaching average valuations, investors should gradually add equity exposure to portfolios.
What is making FIIs nervous about India? Are they booking profits or the smart money is moving towards fixed-income instruments?
In October 2022, India’s relative valuation compared to its emerging market peers reached an all-time high, with India trading at a 90% premium.
However, this premium has now declined to the mid-50% range, which is still slightly above the long-term average of approximately 41%.
This has caused foreign institutional investors (FIIs) to strategically allocate their funds to other emerging markets, aided by a rebound in other economies, particularly China’s reopening trade.
At that time, Chinese equities were trading at less than 10 times trailing earnings, while India was trading at over 22 times earnings. However, this difference has since normalized.
We anticipate that FII outflows will slow down, and as valuations become more attractive, FII inflows may return to India. In addition, higher fixed-income yields in the US may draw investors with lower-risk appetites.
There is a saying that ‘Don’t lose sleep over near-term volatility if you are a long-term investor’. But the current volatility almost resulted in a double-digit fall in portfolio value for some investors. How should one navigate the markets?
There is ample documented proof that investors who stick to asset allocation and systematically invest during volatile phases end up with beneficial investment outcomes.
Some of the strategies which have been very volatile over the last one year with negative absolute returns have given positive returns through the SIP route.
This is a result of discipline allowing investors to purchase more units when market fall in a volatile phase.
Therefore, investors should continue investing in a disciplined manner as the long-term trend for India remains positive.
What would you suggest to investors if they want to diversify their portfolio towards global markets amid the recession, inflation, and currency risk concerns?
Investors should allocate, based on their risk appetite, a part of their portfolio to international equities or gold & gold mining equities to create uncorrelated exposure. Choosing to do this through a SIP route is a better strategy than to time these international themes.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Economic Times)
