The key risk factor going into FY 2023 is the possible escalation of geo-political tensions from already elevated levels, which could impact global growth, weaken global trade, and might disrupt global supply chains, Harshad Patil, Executive Vice President & Chief Investments Officer at TATA AIA Life Insurance said in an interview to Moneycontrol.
The war between Ukraine and Russia will enter into fifth week on Thursday, March 24.
Patil who has extensive experience of over 20 years in areas pertaining to investments such as fund management, research and dealing functions, says TATA AIA continues to prefer infrastructure space on the back of the continuous spending by the government. “We would also be positive on the banking and financial space at current valuations.”
Edited excerpts:
How do you approach equity markets given the unstoppable Ukraine-Russia war?
Given current geo-political tensions, we feel that markets would remain volatile in the near term. However, any emergence of risk-on trade will be contingent on the de-escalation in geo-political tensions, which then can provide positive triggers for Indian equities.
Do you expect the Fed to turn aggressive in rate hikes in FY23?
The US Federal Reserve (Fed) has signaled its determination to moderate the significant inflationary pressures in the US economy. It has indicated six further rate hikes in CY2022 in addition to the rate hike in the March FOMC meet.
Also read – Goldman sees Fed hiking rates by 50 bps at May, June meetings
Moreover, it seeks to begin the reduction of its balance sheet in the coming monetary policy review meetings. From the FOMC meeting in March, there seems to be no indications whatsoever that Fed intends to go slow on account of the recent surge in geo-political tensions.
If you want to put your money now, what are the sectors to bet on and why?
We continue to prefer the infrastructure space on the back of the continuous spending by the government. Moreover, PLI (production-linked incentive) scheme benefits will provide impetus to the Indian manufacturing and infrastructure sector. We would also be positive on the banking and financial space at current valuations.
Do you expect the market to clock double-digit gains in FY23 as well, after so far 20 percent gains in FY22?
Market gains would be dependent upon the earnings potential of corporates. The ability of the corporates to pass on heightened input costs and still show strong growth in revenues, would be key to sustaining double digit growth in market performance in FY 23.
Most of experts are bullish on the IT space. Are you in the same camp? What is your take on the sector?
Post the recent correction and weakening INR, we do see some opportunities emerging again in the IT space.
What are the possible risk factors that one has to consider while entering into FY23?
The key risk factor going into FY 2023 is the possible escalation of geo-political tensions from already elevated levels, which could impact global growth, weaken global trade, and might disrupt global supply chains. This could add inflationary pressures on a host of commodities and moderate the consumption demand.
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