In an interview with ETMarkets, Bagla who has over 25 years of experience in financial markets said: “Central banks continue to raise rates and Quantitative Tightening is reducing global liquidity slowly but surely,” Edited excerpts:
Benchmark indices failed to hold above crucial support levels in March amid weak global cues. What is spooking markets right now? What are your views?
Equity markets are in a correction mode. Interest rates have gone up both locally and globally – and that acts as dead weight pulling equities lower.
The earnings picture is mixed, and valuations remain high. The correction so far has been gradual and shallow in the indices. I would see it as a natural correction of an overstretched market.
Which sectors do you see could do well in FY24 and why?
Central banks continue to raise rates and Quantitative Tightening is reducing global liquidity slowly but surely.
Prefer to wait before taking sector-specific calls. Bond funds on the other hand could perform well during 2024 as yields have gone up and inflation may come down.
What would be your advice to retail investors for FY24?
A) Information may be freely available across various platforms on social media, but perspective is not. The retail investor does not have the resources to determine the veracity of free information.A fund manager has a recourse to professional research and the perspective to determine the long-term value of a company.My advice to retail investors would be to go through mutual funds to access equity markets and not go direct as much as possible
What is your view on global diversification in 2023? FIIs seem to be moving away from India and investing in other EMs and treasury amid higher valuations.
In 2022, the FII flows into EMs declined by 90% over the flows that were seen in 2021. Global tightness in financial conditions, and lower growth expectations led to a decline in valuations and flows.
Hopefully, 2023 would be better than 2022 in terms of overall inflows to Emerging Markets (EMs) and India as well.
What is your take on the GDP data which has slowed down? Do you think this could push away smart money?
Slower GDP data could drive away hot money. Smart money should have a longer perspective on the prospects of the Indian economy.
Most markets are going through a stage of flux and data could add to volatility in prices and flows.
What is your investment style amid volatility?
Over the years, the investment style has evolved to focus more on longer-term factors and values as chasing returns in the short run is mostly self-defeating and futile
What are your key learnings from the financial year gone by?
A few quarters back, I had advised investors to reduce risk across asset classes. Prices did fall across equities and bonds, but more gradually than anticipated.
I realised that liquidity can elongate the impact of negative developments over a longer period of time.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
