The market is staring at uncertainty and even as the macroeconomic situation remains strong, investors should expect a high single to low double-digit returns this year, says Asheesh Chanda, Founder & CEO at Kristal.AI, in an interview with Mint Genie.
Rate hikes are now in the offing. How do you see the impact of rate hikes by the Fed and RBI on the Indian market?
In the past, US rate hikes have coincided with institutional money getting pulled out of emerging markets, especially in the fixed income domain.
We have already seen a round of foreign money exiting the fixed income and equity markets.
The RBI, however, would continue to focus on the domestic macro-economic situation which is a lot more robust than in other emerging market countries.
The RBI, while not moving to an outright hawkish stance, might pare down their dovish stance, resulting in the G-Sec (government securities) yield rising up marginally.
A larger effect would be seen in the currency market with a potential for the rupee to weaken further.
The Russia-Ukraine conflict is a major threat to the global economy as it has shot up commodity prices. Even though India is not much exposed to the Russian or Ukrainian market, do you see a long impact of the Ukraine crisis on the Indian economy?
The impact on a country like India is two-fold. India is primarily an importer of commodities, especially oil.
Even though the country is not directly exposed to the Russian and Ukrainian markets, the global increase in commodity prices would have an effect on domestic inflation.
Sanctions on Russia are likely to remove a chunk of the global oil supply, and this situation can persist for a while.
The economic authorities would have to do a balancing act between rising fuel rates and growing demand without letting inflation run amok and on the positive side, a lot of the global grain market depends on supply from Ukraine.
With a surplus ourselves, India has an opportunity to fill some of the gaps in the global demand for food grains.
What is your outlook for the Indian market for FY23? Can we expect double-digit growth this year?
Our outlook for the Indian economy and the markets, in general, is positive. The country is one of the faster-growing segments within the emerging markets.
From a GDP growth perspective, India is likely to grow around 8 percent this year and a little over that the next fiscal year, based on data from the Asian Development Bank.
The markets however are more expensive than both peers and historical valuations. Measured by standard ratios like price-to-earnings.
With very strong returns in 2020 and 2021, we might have to stay cautious in terms of the outlook for the market returns.
While the macroeconomic situation remains strong, it would be fair to expect the high single to low double-digit returns this year.
What are some key themes to invest in India and globally?
There are several interesting themes playing across the world. Within India, the consumer-driven sectors remain in vogue and would remain an attractive theme for the near future as well.
Globally, commodities are an important theme as we expect commodity prices to remain strong on the back of both an inflationary environment and the demand-supply equation.
The semiconductor industry is another global theme that we believe has further room to grow, as the sector is seeing tailwinds in the form of a short-term supply crunch and long-term cyclical demand.
ESG is another key theme globally. As more investments happen in renewables, clean energy and resource management ESG focused allocations are becoming more attractive from a long-term perspective.
Asset allocation is a crucial thing for investors but how should one adjust their portfolio in the current volatile time?
Asset allocation is the primary determinant of the long-term performance of a portfolio.
From a global perspective, having a diversified portfolio is the best bet to increase risk-adjusted-performance.
Given the outlook for the Rupee, any exposure to dollar-denominated assets is likely to be beneficial.
So, the primary adjustment would be to add some foreign equity exposure to one’s portfolio. From the current macro perspective, an allocation to a broad basket of commodities is also likely to be fruitful.
A third key adjustment would be to look at the alternatives space. Alternative strategies are usually less correlated to other asset classes and are especially helpful during volatile times.
Volatile times also call for patience and wisdom. Avoiding speculative and low-quality investments is an equally important piece of the investment decision.
How can Kristal help investors spot better investment opportunities? What new can Kristal.AI offer to investors?
Kristal.AI can help investors by giving them advice on how to complement their domestic investments with global themes.
Investors can select through a wide range of products like active funds, ETFs, Hedge Funds, VC funds, stocks, bonds, etc to create a portfolio that suits their risk profile best.
The biggest value add is that investors do not need to spend time researching products or rebalancing their portfolios. Their RM and investment advisor take care of regular monitoring of the portfolio.
A few unique investments that Kristal has are Pre-IPO stocks, Life settlement funds, structured notes and also managed portfolios.