Equities to remain attractive bet in FY23: Srinivas Rao Ravuri, PGIM India

Despite record outflows of Rs 1.42 trillion in fiscal 2021-22 (FY22), PGIM India MF sees India as an attractive destination for foreign investors considering the long-term structural growth story.

Despite record outflows of Rs 1.42 trillion in fiscal 2021-22 (FY22) by foreign portfolio investors' (FPIs), SRINIVAS RAO RAVURI, chief investment officer at PGIM India Mutual Fund, tells Lovisha Darad, that Short duration and corporate bond funds that are managed actively and run for lower duration are best suited to ride the change in interest rate cycle. Edited excerpts:

What is your return expectation from the markets in FY23?

We are currently in a consolidation phase. There are too many moving parts at this point. The end of war in Ukraine may happen soon, but that will not end all concerns as disruptions are likely to continue since sanctions are unlikely to end. After healthy returns in FY21 and FY22, the expectations of another healthy year are low considering the current geopolitical situation and inflation.

FPIs have been in a 'sell mode' since October 2021. Do you see the pace of outflows picking up over the next few months?

We have seen moderate FII inflows in recent days; let's hope things turn better going forward. It is impossible to predict short-term flows as interest rates have started to harden in the US. However, India is an attractive destination for foreign investors considering the long-term structural growth story. Inflows into MFs and retail investors supported the market. Domestic flows will continue to act as Financialisation of savings and equities will remain an attractive asset class.

How should investors' navigate debt funds amid rising interest rates?

Investors’ should look at funds which are actively managed and have lower portfolio duration. Short duration and corporate bond funds that are managed actively and run for lower duration are best suited to ride the change in interest rate cycle.

What should investors' expect from FY23 earnings season?

There is a fair bit of uncertainty regarding FY23 earnings. Though consensus estimates are still at 17 per cent earnings growth for FY23, we will see a cut in the coming weeks and should be happy to achieve double-digit growth considering the challenging environment.

What has been your investment strategy? How much cash are you sitting on (on average) across your schemes?

We follow the investment philosophy of GARP - Growth at Reasonable Price, which considers the importance of earnings growth while avoiding paying an excessive price for potential growth. We have successfully avoided investing in IPOs of new-age companies and calibrated our portfolios to take into account the changing environment. We do not take cash calls; our average cash levels would be 2-4 per cent.