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Daily Voice | India uniquely positioned as a structural, domestic growth story in medium to long term: Rahul Bhuskute of Bharti AXA Life

For long-term investors, India is an attractive investment destination and short-run corrections are opportunities to increase equity investments.

May 17, 2022 / 10:19 AM IST
Rahul Bhuskute is the Chief Investment Officer at Bharti AXA Life Insurance

Rahul Bhuskute is the Chief Investment Officer at Bharti AXA Life Insurance

Global supply chain concerns, rising crude oil and other commodity prices, and accelerating consumer price inflation have taken a toll on the equity markets, but it is difficult to say whether their full impact has been priced in, Rahul Bhuskute, CIO at Bharti AXA Life Insurance, said in an interview to Moneycontrol.

He said in the short run, volatility will be high with sharp movements on either side, but for a long-term investor, India remains an attractive destination and short-run corrections are opportunities to increase exposure to equities. Edited excerpts:

Power outperformed every other sector and the benchmark and broader indices. Is it the right time to buy this space or is it overbought?

Yes, the power sector has outperformed the broader market indices in the recent past, driven by stronger-than-estimated demand for power by industries and households. Demand has also accelerated, given the onset of summer.

For instance, power demand in April and May has been growing at a robust 13 percent and 19 percent, respectively. On the other hand, power generation has not kept pace (not much additional capacity has been added), taking the country into a deficit situation.


A strong environment for power demand is a positive for power generators and distributors. As economic activity picks up in the country and with a return to office across most cities, we see continued strength in power demand over the rest of the year. We remain positive on the sector.

What are the themes that you want to suggest now as the market declined about 12 percent in the past one-and-half-months?

We remain positive on domestic themes such as manufacturing, credit growth and rural recovery. This would entail being overweight on sectors such as financials, industrials, autos and consumer. We also like the back-to-office and rising income level themes such as real estate, both commercial and residential (end user markets).

Given the headwinds that the markets face at the moment – reducing liquidity, rising yields and persistent selling by FIIs – the overall market and even stocks in these sectors might continue to face some pressure. However, we believe for genuine long-term investors, these sectors provide good entry points now.

What factors has the market already priced in and what is yet to be priced in?

The markets appear to be factoring in concerns over a rise in inflation as well as policy actions through rising rates. Global supply chain concerns, rising crude oil and other commodity prices and rising consumer price inflation have taken a toll on the equity markets over the past few months. It is, however, difficult to say whether the full impact of these concerns are already in the current prices.

Additional negative news on the Ukraine-Russia war or on inflation could further erode sentiment as well. The wider emerging markets (EM) selloff call by FIIs, given a rising dollar, would also continue to weigh on the markets. An additional factor to monitor is whether DII flows that have been providing some support to the indices continue to remain stable.

Timing the market is a difficult thing to do and we recommend that investors use these volatile periods to buy into high-quality companies for the long term. Usually these companies are available at dear valuations. Now, the valuations are in far more comfortable territory.

Is it still a ‘buy on dips’ market or has the narrative changed to a ‘sell on rise’ market?

It depends on the investment horizon of the investor. In the short run, volatility will be high, with sharp movements on either side. But for a long-term investor, India remains an attractive destination to invest and short-run corrections are an opportunity to increase exposure to equities. Our engagements with global strategists and investors continue to reinforce the unique position of India as a structural, domestic growth story in the medium and long term.

Will Europe face a recession kind of environment due to the Ukraine war? If so, could there be another round of big selling in the equity markets?

It does appear that Europe is potentially staring at a recession in the making, driven by the Russia-Ukraine war and associated economic sanctions resulting in a surge in food and energy prices. In the first quarter, the euro area grew only 0.2 percent.

Given the high inflation, central banks will continue to hike rates and these would be anti-cyclical; so one would continue to see European growth under pressure. We are already seeing euro zone growth forecasts getting cut aggressively with risks of further downside.

The Covid situation in China is further aggravating the supply chain problem. There is a genuine worry about stagflation. Equity markets globally have already started seeing selling pressure and the pressure might remain for some more time.

The RBI finally started hiking policy rates. Do you think the RBI could turn more aggressive in rate hikes in the second half of 2022?

We turned bearish on Indian yields almost a year ago and were of the view that the central bank was behind the curve in the face of persistently rising inflation and the significantly higher government borrowing programme.

The recent moves by the RBI are in the right direction, though the market seems to have been way ahead of the central bank in right-pricing most parts of the yield curve.

Since the April policy, overnight rates have been hiked by 80 bps, first through introducing SDF (standing deposit facility) as the floor for the LAF (liquidity adjustment facility) corridor at 40 bps above the prevailing reverse repo rate, and second through hiking of the repo rate by 40 bps in the May policy.

The RBI has stated that with the normalising of the economy, there will be a reversal of the pandemic-era easing cycle (total cuts of 115 bps). We hence expect a front-ending of rate hikes of an additional 75 bps in the next three policies (June, August, October) taking the repo rate to 5.15 percent. Post that, the RBI may pause and re-assess the impact of rate hikes on inflation.

Even at a repo rate of 5.15 percent, the real rates would be negative, unless inflation does a climbdown. As such, there could remain further ground for the RBI to cover. Additionally, with elevated crude prices and the global risk-off/EM selloff, the RBI needs to have a firm eye on the external front too, something that it has not had to do over the last 6-7 years.

So the base position today seems to be that RBI would have a busy second half as well, unless there are a lot of unexpected positives (war, China, inflation) at the same time.

Disclaimer: The views and investment tips expressed by investment experts on are their own and not those of the website or its management. advises users to check with certified experts before making any investment decisions.
Sunil Shankar Matkar
first published: May 17, 2022 10:19 am
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