ICICI Pru MF's Naren expects market to stay volatile in 2020, US-Iran tensions to hurt sentiment

Government reforms, announcements in the Union Budget, the outcome of US elections, and exchange rate movement will be key drivers for the market in calendar 2020, according to S Naren, Executive Director and Chief Investment Officer at ICICI Prudential MF.If the US-Iran issues remain unresolved, then the market could be pulled down further, he noted, adding, the extent of the damage, however, however, cannot be predicted.

Last year's drone attacks on Saudi Arabian oil assets was presumed to be the trigger for a rally in crude but the same subsided in a week, he said.

The S&P BSE Sensex plunged more than 850 points intraday on January 6 as sentiment was hit particularly after Iranian vows of retaliation over the US killing of a top general. The Nifty 50 broke below the 12,000-mark.

The BSE Sensex eventually closed 788 points, or 1.90 percent, down at 40,676.63, while the Nifty 50 settled 234 points, or 1.91 percent, down at 11,993.05. The BSE Midcap and Smallcap indices fell 2.31 percent and 1.96 percent, respectively.

Rising geopolitical concerns also sent crude oil prices soaring and gold prices to fresh record highs.

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Brent Crude Futures hit a high of $70.45 per barrel in early trade.

Gold prices in India surged with February gold futures on MCX gaining 2.3 percent or Rs 918 to a record high of Rs 41,030 per 10 gram. 

Naren recommended that investors put money in risky assets due to low credit growth, particularly small-cap stocks.

“When credit growth is low, one should put money in risky assets class and when credit growth is very, very high, one should take out money from some riskier asset class,” Naren said.

In the current market scenario, schemes such as balanced advantage fund and asset allocation funds are very appropriate for making investments.

He further pointed out that mutual fund inflows have moderated, but inflows through systematic investment plans have remained steady.

Flows from foreign institutional investors (FIIs) will also dictate the market sentiment in 2020.