The Indian markets have slumped significantly in the past couple of sessions on the back of a weak rupee and deteriorating macroeconomic fundamentals. Ashish Ranawade, chief information officer at Union KBC Mutual Fund, discusses with Surabhi Roy the road ahead for the markets, the likely rupee movement and investment strategy. Edited excerpts:
The markets have touched new lows amid selling by foreign institutional investors (FIIs) on concerns of a weakening rupee coupled with political and economic crises. Is it advisable to have a stock-specific approach at this juncture and start accumulating at the current levels?
For a retail investor, it always makes sense to invest in a mutual fund in a systematic manner (small amounts spread over a pre-decided period of time). The fund managers should be able to manoeuvre the portfolio through various market conditions and try to outperform the benchmarks. When the market falls sharply as we have witnessed recently, it is risky to pick stocks hoping that there will be a bounce, which may happen, but could be temporary. Since the current fall has been very severe, it may be advisable to wait till the markets stabilise/consolidate and the panic subsides to invest in any significant manner.
Retail investors have practically deserted the markets. What steps can the government take to increase retail participation in the Indian markets?
The government has ensured there are various tax incentives and the appropriate investment vehicles (such as various types of mutual funds) are available and the markets are well regulated for the retail participants. The markets by their very nature and the various market participants should make efforts in that direction.
How much more pain can we expect from the rupee and rising crude oil price? What are the immediate solutions?
Given the levels we have seen, hopefully not much especially on the rupee, but crude is beyond our control and with the recent developments in the middle east, it continues to be a source of risk for us.
Several banks have raised home, car and personal loan rates. How will this play out as far as interest rate-sensitive sectors are concerned?
Any rise in interest rates will impact the rate-sensitive sectors in the short-term. However, the good monsoon we had this year and a buoyant rural economy thanks to the upcoming general elections should also help alleviate the pain a bit. Export opportunity could be big with the recent rupee depreciation.
IT stocks continue to rise on hopes of better realisations as the rupee fall continues. Any preferred pick from this space?
IT should be able to withstand the current onslaught purely on the basis of rupee depreciation, but they do have issues with regards to top-line dollar growth and pressure due to the impending immigration Bill in the US.
Are you advising investors to shift towards fixed-income instruments in this market situation?
Even the fixed-income funds have been under pressure due to the rising yields and some of the long duration funds have given negative returns in the short term. But over the longer term, we can expect good returns from fixed-income funds, if one were to invest now.
The broader indices are battered significantly. What's your view on this? Can you suggest three stocks from the mid-cap pack (with targets) that can be bought/sold at current levels from a medium-term perspective?
FII holding in Indian markets has gone up significantly over the last few years and these investors are sitting on losses largely due to the rupee depreciation and also on account of poor performance of the companies/markets. Most of their holdings are in large capital companies, which have high weight-ages in the broader indices. So when the FIIs sell due to either redemption pressures or due to portfolio rebalancing reasons, most of the impact will be on the broader indices.