Impact of a global recession may be minimal on India; positive on domestic sectors: Chintan Haria of ICICI Pru AMC

Chintan Haria, Head of Product Development & Strategy, ICICI Prudential AMC is positive about the Indian market and economy. In an interview with MintGenie, Haria shared his views on the market and the economy and also explained why SIP is the best route of investment.

Edited excerpts:

A recession in the US looks almost certain now. How will it impact the Indian market in your view?

While the developed markets may face a recession, we believe India will not be in a similar situation. 

Our belief stems from the fact that India's growth story is largely domestic and hence the impact of any global stress will be relatively minimal. 

Any potential impact will be temporary, and we will be able to revive faster. 

At such times, markets could come under pressure. Any correction should be seen as a good opportunity to add Indian equities with a long-term view.

Is the worst behind for the market? Have we fully discounted rate hikes? Are the fears of the Ukraine war behind us?

Courtesy of the prudent measures and policies by the Reserve Bank of India and the Government of India during the pandemic, our economy has come out stronger than the rest of the world. 

As a result, Indian equity markets have been resilient, unlike global markets which have seen a sharp correction. 

The rate hike cycle in terms of the speed of hikes seems to be behind us as inflation globally should soften as commodities have corrected and the base effect will play out. 

The end of the Russia-Ukraine conflict will positively affect the global markets. However, it is only in hindsight that we will know if the worst is behind us.

What should retail investors do when there is uncertainty about the short and medium-term course of the market and the economy?

While day-to-day events may result in a lot of noise, investors should focus less on these and remain disciplined with their investments with a long-term view. 

While at it, be mindful of asset allocation as it is the cornerstone of a successful investment experience. 

Given that the equity valuations are rich, for a lump sum, investors can consider investing in categories like the balanced advantage or the multi-asset category wherein the fund manager basis of the risk-reward assessment will deploy investments across asset classes. 

Investors can continue with their SIPs and make use of features like booster SIP/STP to achieve long-term financial goals in a disciplined and systematic manner.

What sectors could lead the rally? What sectors are you betting on at this point?

We are positive on domestic sectors like banks and auto, infrastructure and capital goods. 

Bank credit has shown robust growth; branch expansion, and digital capabilities have been aiding large private banks in strengthening their deposit franchise. 

On the back of adequate capital buffers and improving asset quality, large banks are well-positioned to support economic growth. 

When it comes to autos, we believe wholesale and retail demand will sustain in the medium term. 

Also, supply chain constraints have been largely normalised with most OEMs operating at nearly 100% capacity. 

Given the sustained investment push of the government, we are positive on infrastructure and capital goods. 

Even though cement as a sector had a weak second quarter, there is a possibility of a bounceback in the coming quarters.

What is your view of the mid and small-cap space? Should retail investors focus more on large caps because they are more capable of enduring market volatility and economic shocks?

In a growth economy like India, small and midcaps provide a good space for long-term wealth creation. But investors should be mindful of their risk appetite when including small, midcap in their portfolios. 

It is ideal to invest through mutual funds with a long-term view as direct investing requires tremendous research and investors may not have time to follow up on the events which could potentially impact companies in small and midcaps.

We cannot control macro events. How can we protect our portfolios in such uncertain times? What are the key investing mantras retail investors should follow?

To begin with, adhering to asset allocation and being patient with one’s investment is the key to a successful investment journey. If one is unsure how to go about optimal asset allocation, then invest in categories like the balanced advantage or multi-asset category scheme. 

Here, the fund manager basis the evolving macro and micro conditions will judiciously take allocation calls such that an investor can gain from various opportunities presented by multiple asset classes at any given time. 

In effect, an investor will not have to worry about any local, global macro or micro developments and be at ease with one’s investments. Continue with SIPs as over a complete market cycle, the investment experience will tend to be superior.

Disclaimer: The views and recommendations given in this article are those of the analyst. These do not represent the views of MintGenie.