Daily Voice: Investors should remain cautious of global developments amid heightened geopolitical risks following recent Pahalgam attack, says this CIO

As anticipated, earnings are expected to be more divergent and the gap between performers Vs non-performers is going to be wider. Select companies in sectors like financial services are showing robust growth and improvement in performance metrics, while their counterparts in the information technology sector are showing signs of slow down.

As a PMS our churn ratio is one of the lowest and no significant changes are made in the portfolio holdings. We keep close watch on performance of portfolio holdings, and we make adjustments only when there is a significant deviation from our performance expectations or we site better investment opportunity.

What is your view on the consumer sector? Do you see a lack of valuation comfort in this space?

At a macro level, the government has taken initiatives to invigorate the consumer sector. Despite this, investor caution remains well-founded, as many companies in the segment have experienced prolonged corrections due to overvaluation and tepid growth.

While policy support is a positive signal, the prevailing structural challenges within the sector require a closer look at the fundamentals of individual companies. Consequently, investors need to adopt a more discerning approach, carefully evaluating each firm's performance and growth potential before investing.

Do you think the RBI is more likely to opt for a steady reduction in interest rates to support growth, rather than front-loading rate cuts?

A gradual reduction in interest rates is preferable in most cases for sustainable long-term growth. Gradual reduction approach helps mitigate the risks of overheating and capital misallocation that can occur with abrupt, accelerated rate cuts. Case for frontloading of rate cuts is justified when there is a need and case to revive consumer confidence and stimulate economy while it requires close watch on its inflationary impact which will make it counterproductive.

Do you expect some inflationary pressure in the coming months due to supply chain dislocation?

Disruptions in the supply chain has direct impact to inflationary pressures, with effects that often percolate across multiple industries. In recent years we have witnessed multiple events causing supply chain disruption i.e. covid-19, war, shipping logjam, labour shortage etc., which impacted household essentials to car chips. More recently the tariff war that is causing supply chain disruption may play out advantageous to India, as many large MNCs will look to diversify their production out of China and other high tariff countries to countries like India.

Are you bullish on PSU stocks and the auto sector?

We haven't made any material adjustments to our existing portfolio, as our confidence in the long-term growth trajectory of our investee companies remains unchanged. Our investment approach focuses on retaining high-quality, fundamentally strong businesses that will drive sustained value over time.

We closely monitor the performance of our holdings along with impact of geo-political challenges on their businesses. Portfolio adjustments are done only when we see significant divergence in the performance trajectory of investee companies or we see a better investment opportunity.

We are prepared to incrementally increase our exposure should an opportunity arises to add to our positions at valuations that meet our criteria.

Are you cautious about the capital markets segment?

In current volatile market environment, investor must remain cautious of global developments, given the heightened geopolitical risks following the recent events in Jammu & Kashmir. It is imperative to exercise extra caution when investing into sectors that are particularly sensitive to external uncertainties and geopolitical tensions.

Discerning investment strategy is advisable, like keeping well diversified portfolio of companies with strong fundamentals, solid track record of sustained business growth along with cash flows while staying away from companies with high valuations, uneven business growth and weak cash flow generation. A balanced approach of systematic investment in quality companies is advisable against aggressive cash calls.

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