Happy Women’s Day!
Shibani Sircar Kurian, Senior EVP and Head – Equity Research, Kotak Mahindra Asset Management Company, says financial independence is a very important step for all women to take and, considering that women are doing it all, this itself should be pretty easy to achieve.
Investment options would differ depending on the stage of life and the investment goals and, therefore, sticking to asset allocation strategy and being disciplined is the key, she says.
“While there are near-term uncertainties on account of rise in commodity costs and some possible impact on near-term earnings, we do expect that this event will likely have limited impact on the earnings profile of Indian companies from the medium to long-term point of view,” the seasoned equity market professional shares in an interaction with Moneycontrol. Excerpts from the interview:
What would be your advice to her if she is new to the equity markets?
I must start with the Mutual Funds. These are excellent for investing for the long term in a disciplined manner based on her asset allocation strategy. Here you have a fund manager who is doing the difficult task of evaluating companies and investing on your behalf.
Also, remember that timing the market is extremely difficult and hence, giving time to the market is the key. Therefore systematic investment plan (SIPs) would likely be the best way forward irrespective of market conditions for someone who is new to equity markets.
In case of lump sum investments, products like a balanced advantage fund or asset allocator fund is a good option who want to leave the timing and the asset allocation to the fund manager. Further, taking the help of your investment advisor to decide the portfolio based on individual needs is also a good idea.
In the last few years, there has been a significant increase in participation of women in equity markets. Do you think it would double in the next couple of years?
It is indeed a very heartening sign to see increased participation of women in equity markets. Financial independence is a very important step for all women to take and considering that women are doing it all, this itself should be pretty easy to achieve.
In investing, it is not about risk aversion it is about decision making- the ability to evaluate different situations and make decisions- this is where women bring a fresh perspective to the world of finance and investments. So the first step to managing your finances would be to ‘take ownership’ of the task.
Investing would mean differently for women in different roles. Hence, investment options would differ depending on the stage of life and the investment goals and therefore, sticking to asset allocation strategy and being disciplined is the key.
State election results will be out this week. Do you see any impact on the market?
There are many factors to watch out for in terms of their impact on markets. The global situation with the Russia–Ukraine crisis and its impact on commodity prices, monetary policy decisions by central banks are some of the key areas of focus for equity markets, the outcome of the state elections would also be important from the domestic perspective.
Also read – Exit Polls 2022 Highlights | BJP to win big in UP, Manipur; AAP wave in Punjab; close contests in Goa, Uttarakhand
India has in the last few years seen a significant change in policy focus with push towards long-term sustainable growth and a reforms agenda. Continuation of this is the key for the long-term prospect for the equity market.
What are the supportive factors offsetting the impact of oil price rise?
The Russian invasion of Ukraine and likely lower exports of Russian crude oil could keep crude oil prices elevated in the near term. The timing of the end of the conflict is not possible to determine and hence we would have to navigate through volatility for some time.
For India, the biggest macro impact of the crisis is in the form of elevated crude oil and commodity prices which impact inflation, balance of payments and growth. It is estimated that India’s Current Account Deficit rises by around 30bps for 10 percent rise in crude oil prices, CPI inflation by around 40bps and GDP falls by around 20bps everything else remaining constant. Higher crude also pushes up prices of gas, coal, edible oil and fertilisers.
Also read – Barclays raises CPI inflation level for FY22-23 to 5.1% from 4.5%, on crude price rise
However, unlike in the past, India is better placed on the external front today with forex reserve of around $ 630 billion which does give the central bank the ability to counter some of the volatility in the external markets.
India’s economy has also been witnessing a sharp recovery post the Covid waves and high frequency indicators have shown improvement in February over January 2022. A lot of the continuation of the economic recovery would however depend on the period over which crude oil and commodity prices stay elevated.
What should Indian investors do now, given the risk-off situation, higher oil prices and inflation concerns?
The factors that are creating a lot of uncertainty for India and the world is the crude prices as well the response of central bankers around the world as inflation moves up in many countries. Our approach to portfolio construction at this point is more bottom up in nature and stock specific. Hence, the key would be to evaluate everything from a bottom-up basis and build a portfolio rather than taking a more top down view and selecting a few sectors.
We would continue to advise investors to stick to a disciplined approach to investment based on their investment goal, time horizon and asset allocation strategy. At current valuations, we continue with our recommendation of being neutral on equities in the overall asset allocation basket with a slight overweight for large-caps over mid- and small-caps.
Also read – Ukraine upends stimulus exit: Five questions for the ECB
Do you expect significant downward revision in earnings estimates for FY23 considering the current situation?
While there are near-term uncertainties on account of rise in commodity costs and some possible impact on near term earnings, we do expect that this event will likely have limited impact on the earnings profile of Indian companies from the medium to long-term point of view.
While energy prices are currently high, we have seen in the past that high energy prices do not last forever. The longest period crude was above $ 100 was in 2013-14 where for three years or so, crude was steadily trading at $ 100 per barrel and later on, crude corrected very sharply from those levels. Therefore, commodities always move in a cycle.
From a medium to longer-term perspective, we are expecting roughly mid-teens earnings growth for Indian corporates as we move forward. Prior to the Russian-Ukraine conflict, the corporate earnings in India were clearly recovering. Higher input costs in the very near-term could have a bearing on margins. However, if the demand recovery stays on track, companies would have some ability to pass on higher input costs to offset the margin pressure.
FIIs have net sold more than Rs 2 lakh crore now. Is it a bigger risk for India in the long term and also is the long-term money moving out from India?
India had massively outperformed its peers and hence is bearing some of the brunt of the FII profit-booking even while DII are net buyers. Overall there is a risk off sentiment where FIIs are concerned and is reflected in quantum of selling.
A lot of the FII outflow is being countered by domestic inflows which is helping the markets. Current year-to-date while FIIs have sold $ 9.8 billion, DIIs have been net buyers to the tune of $ 8.5 billion. In the past too, we have seen volatility in FII flows and hence one cannot extrapolate the current trend over the long term.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
