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Last Updated : Nov 26, 2018 03:41 PM IST | Source: Moneycontrol.com

Investors need to brace for rising volatility if election results surprise: Motilal Oswal AMC

There is a broad realisation that public sentiments and considerations that drive state and general elections differ and hence such results cannot be extrapolated, says, Siddharth Bothra, Senior VP and Fund Manager at Motilal Oswal AMC

Sunil Shankar Matkar

Investors will be keenly looking at state elections to draw likely scenarios for the 2019 general election outcome. However, there is a broad realisation that public sentiments and considerations that drive state and general elections differ and hence such results cannot be extrapolated, Siddharth Bothra, Senior VP and Fund Manager at Motilal Oswal AMC told Moneycontrol’s Sunil Shankar Matkar.

Nevertheless, investors should brace for increased volatility in the event there are any major surprises in either directions from the consensus expectations. Edited excerpts:

Q. Do you think the market can hit new highs or is there a chance for double-digit returns in the next one year after rangebound trade in last one year?

A. Given the macro challenges, valuations and few other near-term headwinds, markets could continue to remain volatile and in a consolidation mode in the near to medium term. The key catalyst for the market has to be a revival in earnings growth, which has continued to disappoint on an aggregate basis even in H1FY19.

Siddharth Bothra
Siddharth Bothra
Senior VP & Fund Manager|Motilal Oswal AMC

    Q. What are your views on state elections and their impact on 2019 general elections?

    A. Investors will be keenly looking at state elections to draw likely scenarios for the 2019 general election outcome. However, there is a broad realisation that public sentiments and considerations that drive state and general elections differ and hence such results cannot be extrapolated.

    Nevertheless, investors should brace for increased volatility in the event there are any major surprises in either directions from the consensus expectations.

    Some of the risks which have led to sharp volatility in Indian markets in 2018, such as macro outlook — primarily induced by crude price movements — coupled with increased political uncertainty due to coming state/general elections, could continue to be the key risk for the Indian markets in the H1CY20.

    In case of global markets fear around global growth sustainable, trade wars, Fed rate hikes and debt unwinding could be key risks going into 2019.

    Q. Rupee is currently at 72 to a dollar. Where do you expect it to settle in the long term?

    A. The rupee has in recent times seen increased volatility given adverse domestic macro factors, driven primarily by crude price movements and EXIM imbalance. Some of these factors are likely to continue to remain volatile and a cause of concern in FY20. Apart from these factors, increasing interest rates globally is also likely to continue to exert increased pressure on the rupee.

    Q. Crude has corrected sharply over the last couple of weeks. Can we expect it to stay in the $60-70/barrel range over the next one year?

    A. Crude prices are driven by so many varied uncontrollable and political factors that it is impossible to make logical data-driven views on it. We feel investors should be prepared for continued volatility with respect to crude until alternate energy options become close to mainstream.

    Q. SIP flows have been strong till date. What is your view on overall flows in the market and MFs in particular?

    A. Domestic flows have been extremely resilient and secular over the last few years. This trend has largely sustained despite the increased volatility witnessed in the markets in recent times. It is to a large extent a reflection of a shift in retail investor profile from speculative market timers to long-term investors.

    While increased volatility or capital drawdowns could test this hypothesis in future and lead to some volatility in this secular trend, we believe the larger trend of the shift in savings towards financial assets is likely to sustain.

    Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

    Assembly Elections 2018: Read the latest news, views and analysis here
    First Published on Nov 26, 2018 09:44 am
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