The best way to beat stock market volatility is to invest systematically in the market through SIP, V Srivatsa, Executive VP & Fund Manager – Equities, UTI AMC, said. In an interview with Surbhi Jain from FinancialExpress.comSrivatsa said when the markets have traded below the long-term average due to liquidity issues, investors should spend more money on stocks. Investors looking for investment opportunities in the current market scenario can look to private sector bank stocks. Srivatsa remains positive on autos as valuations appear reasonable from a long-term perspective. He is also overweight in real estate stocks as the sector is emerging from a 10-year downward spiral. Here are the edited excerpts from the interview.
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1. What is your view on the current market scenario?
Markets are at an interesting crossroads as we will have the first year of normalization after two years of covid-induced disruptions impacting both demand and margins across all sectors, while driving high inflation globally and interest rate hikes by developed markets and India press the ratings. We expect demand to be resilient, given pent-up demand in discretionary sectors and government initiatives in recent years. We believe that, given the high probability of a recession in the global economies, prices will fall for all commodities ranging from crude, food and base metals. Some of this has already been visible in recent months. Therefore, we could see earnings stability in a few quarters and coupled with reasonable valuations could set the tone for good equity market performance. However, we must be wary of global liquidity, given interest rate hikes and the reasonable chance of a recession in advanced economies.
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2. What would you recommend to investors to navigate market volatility?
It has been proven over the years that the best way to beat volatility is to invest systematically in the market through SIP. In addition, when markets have traded below the long-term average due to liquidity issues, investors must allocate more money to stocks.
3. Where do you currently see emerging investment opportunities?
We are positive about the recovery in domestic demand and are overweight in sectors subject to domestic recovery. Our biggest weight and quite active weight is financials, especially banks as we see credit growth returning after a two year lull and also with credit costs normalizing in the upcycle we can look at higher ROA for the banks and given the growth combined with reasonable valuations. We see value in private sector banking stocks. We remain positive on autos as we see a strong rebound in demand and valuations are reasonable from a long-term perspective. We are also overweight in real estate as we are coming out of a ten-year downcycle and we expect the upcycle to last two to three years.
4. How was the performance of UTI Core Equity & UTI Healthcare Fund?
The performance of the core UTI equity fund has improved in recent years as it is managed with a value focus and value has performed well in recent years. The fund has focused on both a top-down and bottom-up strategy with a focus on sectors that trade against value on a relative basis, in addition to focusing on growth-oriented mid-cap and small-cap stocks.
The UTI health fund underperformed the benchmark year-over-year as some of our bets on mid- and small-cap generics underperformed and we were underweight some of the large-cap generics that outperformed. The fund is invested in all sub-segments of the Indian healthcare sector ranging from domestic pharmaceuticals, US generics, hospitals, diagnostics and medical devices and remains a good indicator of the long-term growth of the Indian healthcare sector.
5. What are the main triggers and drivers of future equity markets?
On a macro basis, the inflation trajectory is very important as the market is building some margin recovery in all sectors affected by high inflation. At present, inflation does not affect demand and markets assume stable demand, but continued inflation may affect demand in the medium term. Therefore, the trajectory of inflation is very important. The stability of global markets is also very important as we have strong links with global equity markets. The pick-up in earnings growth in the second half of the year is an important event to keep an eye on.