Edited interview.
As we are stepping into the new year, what are your thoughts on the previous year?
What a year. Just when you thought we had seen enough of uncertainties with Covid, the war had to come up with its own set of impacts. I personally believe that the world, post-Covid, is a changed one and one has to factor that in almost all aspects of life and investing. As we look forward to the new year with renewed optimism, one just cannot not think of the strong data points that India stands at today when compared to the rest of the world. Just when you think it is too good to be true, the renewed fears of Covid in China make you aware of the fragile status of the world at this moment. So, the air of caution should remain in my mind is what I tell myself.
Many Mirae Asset investors would remember the relative underperformance of several schemes in 2022. How do you view the performance?
We did go through our challenges this year due to two reasons. We did receive unprecedented inflows, compared to the market, at the beginning of the year and the other being the changing dynamics in the underlying market. We seem to have started putting that period behind us. We are confident of our portfolio stocks and we feel our positions should start playing out in the coming year. Some parts have started doing so, based on which we are seeing a comeback already. We believe investing should be seen on a longer-term horizon and from that perspective our performance is there for all to see. We now complete almost 14 years of track record in India and the performance so far has been satisfactory.
Has the performance resulted in a change in the investment strategy or tweaking the existing strategy?
Investing for us, is a process of buying strong businesses at a fair price. It is also a process of having strong conviction on the stocks that we include in our investing universe. But one has to always remember that the markets have their own way of behaving and at times they would not favour our views, like last year. At such times, we get into a rigorous process of checking each position of ours and if there are variations with the market condition, we do not hesitate in making the necessary changes. We have gone through the process and stand by our portfolio stock positions. Broadly our investment process remains intact and we look forward to the coming year.
The stock market is scaling new highs, but many uncertainties are still haunting the market. What is your view?
We expect Indian equities to consolidate around the current range, albeit with elevated volatility, given the limited room for equity valuation re-rating in the rising interest rate scenario. Second, while corporate earnings have been strong and resilient in the last two years, we do see risks to downside for earnings going forward. This is on account of deceleration of the Indian economy (RBI projects 4.5% GDP growth in 2HFY23). For corporates we expect some early signs of capex revival manifesting itself given the excellent balance sheet strength of corporate India, strong balance sheets of Indian Banking sector and capacity utilisation about to cross 75%.
The market has to deal with the same issues in next year -2023. Should investors brace for turbulence?
Given the unprecedented volatility and macro headwinds (Central Banks raising rates, higher inflation, Russia -Ukraine and domestic economy slowing down), it is important for investors to focus on their asset allocation strictly. A disciplined SIP approach is the right way to benefit from the market swings. While investing in such times, one must do so in companies with earnings visibility, decent balance sheet/cash flow metrics and proven management quality should be the cornerstone of any investment thesis is our view.
Investors should know that when data points are not good, the market becomes conducive to investing as it gives a long-term value proposition. So next year could be the year of accumulation. Due to rising interest rates, long term Debt options give good entry points to lock into some good yields too. It is a good time to be an investor if one is able to look at the long term picture and is able to cut out the short term noise.
India is supposed to be an exception in an otherwise troubled global scenario. Do you think India can be completely shockproof?
We do not think that India or any economy for that matter can be completely shock proof. The US current data is a great example of how things can change in a short period of time. Yes, one cannot deny the strong position that India is in today. This is due to consumption demand and growth numbers showing up across segments, from power consumption to four-wheeler numbers via medical insurance and GST figures. India does stand in a position of rerating given its visible strength in demography and corporate earnings. So one has to look at India with a different point of view going forward. I have always said this, redeem India at your own risk.
Do you think any particular trend or theme would be prominent in 2023?
As a fund house we have been proponents of themes globally. Themes an overall umbrella under which various sectors play out. Themes grow structurally with time and economy and hence their risk reward can be better than lower market cap investing. We believe that overall consumption and Healthcare do give you renewed opportunities. Our view of banking and financials seems to be playing out well now and we would continue to back the same. We do remain cautious on IT, but at some time, long term investors could look at the favourable valuations though the short-term ride could be volatile.
What is your advice to mutual fund investors, especially new investors?
As a mutual fund investor, one generally starts it as a return generating journey. Over a period of time one graduates to realise that investing is a process of managing risk. One should always invest with a purpose or goal in mind. It is only then that one can find a tangible investment experience. It is only with a Goal that a portfolio formation or allocation to various products is possible.
