Unlock BFSI 2.0: Markets not running ahead of economy, say MF experts

With interest rates low and not much happening in the real estate sector, more and more people were investing in equities directly, the experts said

The top executives of some of India's top mutual fund companies on Friday unanimously agreed that the market was not running ahead of the economy. While all of them were of the opinion that the market rally was liquidity-driven, with nothing much happening materially, they underlined that there was ample potential for growth. The experts were speaking at the fourth webinar of Business Standard’s six-part Unlock BFSI 2.0 series
 
The panelists in today’s webinar, titled ‘Is the market running ahead of economy’, were HDFC MF Chief Investment Officer Prashant Jain, ICICI Prudential MF Chief Investment Officer S Naren, SBI MF Chief Investment Officer Navneet Munot, Kotak MF Managing Director Nilesh Shah, Nippon MF Chief Executive Officer Sundeep Sikka and Aditya Birla Sun Life MF CEO A Balasubramanian.
 
The discussion was moderated by Tamal Bandopadhyay, consulting editor, Business Standard.
 
Kotak MF's Shah said the markets were factoring in certain scenarios. "If the future scenario develops in line with the expectations of the market, then the market is not ahead of the fundamentals," he said. However, he further said: "If economic activity picks up, a medical solution (to the coronavirus crisis) is found, monetary stimulus works on the ground, and participation by institutional and retail participants remains heavy, markets will not be ahead of fundamentals."

 
Commenting on the rising interest in markets, ICICI Prudential MF's Naren said the coronavirus-induced lockdown had left people with a pool of savings, which was growing as they were unable to spend in the current scenario. With interest rates low and not much happening in the real estate sector, more and more people were investing in equities directly. "In April, people were able to get one year's interest on fixed deposits in one week," he said. He, however, cautioned that despite the exuberance, people needed to be aware of the risks involved in equity investing.
 
Aditya Birla Sun Life MF's Balasubramanian praised policymakers for their timely intervention. "Policymakers have reacted at an unprecedented speed this time," he said, adding that it was for the first time that support was being provided as a percentage of gross domestic product (GDP). He further said that there was potential for V-shaped economic growth.

 
HDFC MF's Prashant Jain said he did not see any irrational exuberance. "Markets are forward-looking. They are already looking at the next year and beyond. I don't see any irrational exuberance," he said. While he said the intrinsic value of businesses had been minimally impacted, he added: "The current economic situation will cause a lot of pain to lower- and middle-income groups in the country."
 
SBI MF's Navneet Munot said that there was optimism about a resolution to the coronavirus crisis and excess liquidity was finding a way into all markets. He said: "This will be a K-shaped recovery. Parts of the economy will recover. Some will face cyclical challenges, while some others will face permanent challenges."

 
Nippon MF's Sundeep Sikka said fundamentals of the economy remained positive and markets were not overvalued. "Markets are never rational and effectively reflect the fundamentals."
 
Commenting on more millennials getting directly into markets, Sikka said that it was not a thing to be worried about. "It is the biggest positive for India's capital markets," he said. On his part, Naren said that as long as millennials were disciplined and followed a process, they would benefit.