 "MANISH GUNWANI, head-equities, Bandhan Asset Management Company")
The equity market faces two major challenges in the form of high US bond yields and strength in the US dollar, says MANISH GUNWANI, head-equities, Bandhan Asset Management Company (AMC). In an interview with Abhishek Kumar, Gunwani says equities may find it tough unless there is an easing in these two fronts. Edited excerpts:
The market has cooled off after a strong rally. Do you expect the consolidation phase to persist?
Most of the headwinds for the market are global in nature. Two very important challenges today are high bond yields in the US and the strength of the US dollar; both are, to a certain extent, correlated. Unless bond yields come down or the US dollar weakens, it is unlikely that equities will be able to deliver high returns globally, and that is true for India as well.
Currently, the risks for the market are mostly from a global perspective. As a fund manager, how do you navigate those?
As a fund house, most of our overweight positions are in domestic economy-dependent sectors because we feel the global economy is likely to be in a tough phase for the next few quarters. Additionally, having a bit more cash than usual is another way to mitigate risk.
Are the July-September 2023-24 quarter results in line with expectations? What do they say about the economy and companies?
The quarterly results have been mixed until now, with information technology (IT) and consumer sectors being a bit weak while financial has been quite healthy. On the consumption side, the affluent segment is doing quite well, but mass consumption is still lacking strong momentum, although a few segments are displaying green shoots. The capital expenditure-related companies have displayed impressive performance, especially those related to the power segment.
The IT stocks, which were recovering last month, are again seeing a correction. Is the pain expected to persist?
IT stocks are broadly a play on the global economy, and since we expect a tough period ahead, we believe IT stocks may struggle for some more time.
Sector-wise, where are you seeing opportunities right now? Are there any sectors that you are negative about?
We believe select stocks in domestic sectors like financial, automotive, and industrial may be more attractive. Pharmaceutical, too, looks interesting. We believe that IT, chemical, and consumer-related sectors may not deliver as they did before.
It has been over eight months since you joined Bandhan AMC as the head of equities. What changes have you brought to the fund management process?
We have increased our investment in research, and our coverage today is much wider and deeper. Also, we have focused on setting up a robust risk management system for our funds so that extreme calls on macro or styles are avoided. We endeavour to try and deliver consistent performance primarily through our stock selection research process.
Several fund houses are focusing on ensuring diversity in the management of different funds from a ‘style’ perspective. Are you also planning the same thing or already have it in place?
Investment is a mix of art and science. For us, the science part includes measuring and controlling risk. We believe our risk management system prevents funds from taking an extreme skew on style. However, we also believe that analysts and fund managers should not be micromanaged beyond what the risk management process entails, and it is healthy to have fund managers who think differently from each other.
