investment in India?
The eventual tapering of QE stimulus by US Fed may moderate flows into emerging markets. However, in the short term, this risk is not there due to the Fed’s decision to keep the tapering on hold as of now. From a medium-term perspective, we believe that India continues to be one of the attractive markets for investment given where the valuations are, and expectations of gradual economic recovery going forward. Despite the slowdown in growth, India continues to have a relatively higher growth rate from a global perspective.
Which sectors are you betting on?
We are currently overweight on sectors such as IT, telecom and auto. The IT industry is witnessing renewed business momentum along with added boost in terms of year-on-year currency depreciation. After years of consolidation, the telecom sector seems to be on better profitability and growth path going forward. The least favoured sectors are capital goods, power, engineering and metals. As we believe that the revival in domestic capex or investment cycle is still some time away, we are maintaining an underweight stance on all related sectors.
What would be your advice to investors at this point in time?
Most investors have either moved out of or have avoided equities in the recent past due to the underperformance of equities vis-à-vis other asset classes such as fixed income, gold and real estate, resulting in a skewed asset allocation. Currently, equity valuations are well below long-term averages. Also, the economic and corporate fundamentals are expected to improve gradually going forward. Therefore, this may not be the time to be underweight on equity. Over the next 3-5 years, equities will definitely outperform most other asset classes. The current range-bound market actually provides a great platform to make staggered and disciplined equity investments to cash in on economic recovery as and when it occurs.