The upcoming elections, geopolitical conflict, and rising interest rates are the topmost concerns of equity investors, said CIOs at a panel discussion at the Cafemutual Confluence, 2023, a mutual fund conference.
According to Ravi Gopalakrishnan, CIO, Equities, Sundaram Mutual Fund, global interest rates have a massive bearing on equity valuation. For example, he explains, if rates were to fall 100 basis points (bps), markets could rise up to 20 percent. Similarly, if rates go up, the markets could fall.
“I think interest rate movement and war are key concerns. If the middle east conflict spins out of control, then I think the expectation will be that rates will not fall in the US, at least in the first quarter of next year. This is not good for equity markets,” Gopalakrishnan said. He added that oil prices also impact Indian markets. India mostly imports its oil, that too from the middle east.
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On how investors are reacting to current geopolitical conflicts, Hemant Rustagi, CEO, Wiseinvest Private Limited, says that long-term investors are not really worried as they have been around for a long time and realise that markets can be volatile. The concern, he says, is more among new investors, who are new to such volatility. But, he adds that despite the volatility, they have seen good returns over the last few years.
“There are issues, but it's not a panic situation. I think part of the reason for that is when investors come to a mutual fund, they want a professional to manage their money. As long as they have clarity in terms of asset allocation, time horizon, etc., most people do not panic,” he adds.
Rajesh Bhatia, CIO, ITI Mutual Fund, says the upcoming elections can be a `black swan‘ event as government policy can make a big difference to macroeconomic stability. “The growth we're seeing in the capital goods sector is thanks to the investment by the central government. There are various government policies that are driving domestic manufacturing. Any disruption in policy can certainly be a `black swan’ event,” he said.
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Gopalakrishnan added that even though elections are a concern, there is not much one can do about it, or even prepare for it. “It's an event with extremely low predictability. Naturally, the markets will probably get a little nervous ahead of that.”
Amit Tripathi, CIO, Fixed Income, Nippon India, says that one way of looking at this is through a timeframe. “There’s no need to worry from a three to five-year perspective, but a six to 12-month timeframe may cause some jitters. Part of the concern is due to the anticipation. In the first three to six months post elections, we see how things are shaping up. The market will stop worrying once it knows the situation,’’ he says.
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