The best investment opportunity remains in India: Venugopal Manghat

Manghat tells that they have increased cash positions across most of their schemes over the past few months

Falling markets have dampened sentiment among retail investors, as seen in the declining investments across equity mutual fund (MF) schemes. VENUGOPAL MANGHAT, chief investment officer for equity at HSBC MF, tells Puneet Wadhwa in an email interview that they have increased cash positions across most of their schemes over the past few months. This cash, he says, may be used to restructure portfolios or take advantage of opportunities as they arise. Edited excerpts:

 

After a price-wise correction, do you expect Indian stock markets to undergo a time-wise correction as well?

 

The Indian market has corrected significantly in the past few months, and valuation excesses are now lower. The Nifty is currently trading below its long-term average valuation at 18x, with mid-teens earnings growth expected in 2025-26 (FY26). At the same time, the economy has slowed, compounded by liquidity tightness and global concerns, resulting in lower earnings growth this financial year.

 

While many factors behind the slowdown have been addressed, there is limited visibility on when the economy and earnings growth will return to previous high levels. Besides, global uncertainty remains elevated. As a result, the market may consolidate within a range for some time, possibly a few months.

 

Do you think the fall is a correction within the bull market, or is the best phase for Indian markets over?

 

The fundamentals of India’s long-term growth story remain intact, and the economy is still in an expansion phase. However, after several years of strong 7 per cent+ gross domestic product growth, it is likely to moderate to 6-7 per cent in 2024-25 (FY25)/2025-26 (FY26).

  The slower growth is primarily due to reduced capital expenditure amid central and state elections, tight liquidity conditions, and higher inflation driven by rising vegetable and pulse prices.

 

As we move into FY26, some of these domestic concerns should ease, though global policy actions may continue to create uncertainty. A resumption of the bull market is possible once uncertainty diminishes.

 

What are your expectations for India Inc’s March 2025 earnings season?  Corporate earnings reflect the economic momentum or slowdown seen in the broader economy, and FY25 earnings growth is now expected to be in single digits. While some high-frequency indicators have improved in the first two months of this year, we expect a subdued earnings season for corporate India this financial year.

 

We also foresee further cuts to FY26 earnings per share estimates, particularly for some mid and smallcap companies in the fourth quarter of FY25. However, the pace of earnings downgrades should slow.

 

How can investors Trump-proof their portfolios? Is it time to diversify into foreign markets?

 

Since policies and timelines remain uncertain, trying to shield portfolios from this perspective is futile. The best investment opportunity remains in India. The Indian market has corrected significantly over the past few months and has underperformed global markets, especially the US. Valuations have also come down. Many domestic concerns have been addressed, and I believe this correction should be seen as an opportunity to build one’s portfolio.

 

How much cash are you holding across your portfolios? Are you facing redemption pressures? What about the industry as a whole?

 

Cash levels vary across schemes. We don’t take large active cash calls in our portfolios, and our cash balances typically range from 1-5 per cent. However, given the ongoing volatility, we have increased cash positions across most of our schemes over the past few months. This cash may be used to restructure portfolios or take advantage of opportunities as they arise. That said, we continue to see inflows and have not experienced material redemptions in any of our schemes. Even at the industry level, equity flows continued in February, though at a slower pace.

 

Do you think the market crash has permanently dented the confidence of young and first-time investors? Will it be difficult to bring them back to equities?

 

No, I believe there is a better understanding of markets now compared to the last cycle. Investors who entered early in the cycle are still sitting on sufficient profits despite the correction, so there is no panic among them.

 

In any market, there will be weak, uninformed, or less convinced investors who may exit and not return easily. This is especially true for newer investors who haven’t experienced a correction cycle before. However, with increasing investor education, low equity and MF penetration in the country, the higher risk-taking ability of Millennials and GenZs, rising income levels, and growing participation from women, we expect the domestic retail investor base to expand.