'We can expect good returns from FIFs over longer time'

Q&A: Ashish Ranawade, CIO, Union KBC Mutual Fund

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Indian markets have slumped significantly in past couple of sessions on back of weak rupee and deteriorating macro-economic fundamentals. Ashish Ranawade, CIO, Union KBC Mutual Fund discusses with Surabhi Roy the road ahead for Indian markets, rupee movement and investment strategy.

The markets have been touching new lows amid selling by foreign institutional investors on concerns of a weakening rupee coupled with political and economic crisis. Is it advisable to have a stock specific approach at this juncture and start accumulating at 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 predecided period of time). The Fund Managers should be able to maneuver 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 stabilize/consolidate and the panic subsides to invest in any significant manner.

The 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 (like 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 INR (Rupee), but Crude is beyond our control and with the recent developments in the middle east continues to be a source of risk for us.

Several banks have hiked home, car and personal loan rates. How do you think this will play out as far as interest rate sensitive sectors are concerned, and more generally the equity markets?

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 INR 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 INR depreciation but they do have issues with regards to top-line USD 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 the 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?

Foreign Institutional Holding in Indian markets has gone up significantly over the last few years and these investors are sitting on losses largely due to the INR 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 FII’s sell due to either redemption pressures or due to portfolio rebalancing reasons, most of the impact will be on the broader indices.