Daily Voice | Stick to your investment plan even if market is volatile, says Ajay Tyagi of UTI AMC

According to our assessment, gone are the days when the Union Budget used to be the day of announcing big bang reforms or policies. The Union Budget is more an exercise in laying down the statement of accounts of the Government of India with an exhaustive list of where to raise income from and where to spend this income.

A careful assessment does sometimes throw insights into one or more sectors which the government is trying to prioritise and we try to analyse if there are any enduring themes where we can invest from a medium to long term perspective.

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Will India continue to enjoy premium to most of emerging markets in 2022 and why?

Historically speaking, India has commanded a premium to other emerging markets. The reason for this is India's long term structural growth, strong demographics, thriving democracy and a very vibrant stock market. While the premium itself may contract from over the coming year but we expect India to continue trading at a premium to other emerging markets.

Is there any possibility of double digit returns in 2022 in comparison with 2021 (up 24 percent)?

The one learning that we have at UTI over the last few decades of investing is that it is futile to predict the direction of the markets. As far as events are concerned, there is always something or the other that is troubling the market or becoming a source of uncertainty. Rather than predicting the course of the markets or double guessing how various events are going to impact stock prices, we always try to focus on the fundamentals of the businesses that we own.

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What are the major events to watch out for in the coming year 2022?

The Indian equity market in 2021 has seen sharp appreciation driven by a quicker than anticipated recovery from the impact of Covid-19, visible in the high frequency economic data points like tax collections, e-way bills generated for movement of goods, etc. and credit growth has also started to show initial signs of revival.

Also, the corporate sector has handled the situation quite well after the initial shock by bringing in efficiencies in their business models, rationalizing cost structures and improving Balance Sheets, as a result of which, there have been upgrades in earnings estimates over the past couple of quarters after a prolonged period of earnings downgrades. The demand momentum continues to remain strong as indicated by high frequency data points. Commodity inflation and supply chain bottle necks on the other hand have been a drag for corporate sector at large.

We would need to watch commodity prices and inflation over the next twelve months as they have an impact on corporate profitability and demand patterns respectively. The recent correction has removed some valuation related froth and opportunities are emerging in some sectors at reasonable valuations. While the longer-term outlook on the growth of the Indian economy remains robust, there may be some weakness in the near-term given uncertainties regarding Omicron's spread, persistence of commodity inflation and tapering by global central banks.

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Given the rising expectations for three rate hikes in the US in 2022 and liquidity tightening to control inflation, do you expect the RBI to think of rate hike in second half of 2022 or will the RBI continue to priortise growth?

One of the primary goals of RBI is to maintain price stability and therefore targeting inflation in a band is of utmost priority. As per RBI itself, price stability is a necessary precondition to sustainable growth. We therefore feel that while RBI will remain accommodative but it will keep watching inflation very closely and would want to act if the situation so warrants.

What are the great lessons you learned from 2021. On that experience, what is your advice to newage investors for 2022?

The most important lesson that gets repeated time and time again is that to be a successful investor one has to be - emotionally stable, take a long range view and avoid leverage. Investors trying to change their investment strategy every now and then to make quick money or chase momentum will never be able to create sustainable wealth.

Going into the pandemic no one imagined that we would experience such a sharp rally over the next two years. As a result many investors sold out and could not enter the markets again. Our advice to new age investors is to avoid timing the market, have an asset allocation plan, follow this plan systematically and stick to it even when things look volatile in the short run.

If a 25-30 year old investor is looking to invest Rs 10 lakh this year, how should he/she go  about it or create his/her portfolio to get healthy returns?

Like I mentioned above, you need to have an asset allocation plan to start with. After that you need to pick the right mutual fund schemes to realise your plans and keep making investments into them systematically. As far as the timing is concerned, I would say it is never too good or too bad to start in this journey. For a young investor of around 25 years of age these market swings will not matter over his or her next 25 years of journey.

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.