After the Reserve Bank of India (RBI) kept its interest rate unchanged for the second straight policy meet, the Street is filled with hope that the US Federal Reserve may do the same in its June meet. However, Anthony Heredia, MD & CEO, Mahindra Manulife Investment Management, does not see the US Fed pausing its rate hike cycle in its June meeting. The consensus estimate is that of a 25-basis point rate hike, he said. In an interview with MintGenie, he advised investors to remain focussed on asset allocation and invest further only if they have a time frame of five years or beyond.
Edited Excerpts:
Are you satisfied with the RBI policy decision?
The RBI’s decision to extend the pause is a considerate decision. With domestic inflation softening, domestic growth still showing reasonable strength, and more importantly, a stable currency, the decision to have an unchanged policy repo meets the street expectations.
Do you see US Fed also pausing rate hikes in its June meeting?
No, we do not see the US Fed pausing its rate hike cycle in its June meet. The consensus estimate is that of a 25-basis point rate hike. The US inflation and employment numbers still look robust enough at this point in time. However, with one of the largest rate hike cycles in US history taken place, they would probably be more data-dependent while pursuing the future rate trajectory after the June meeting.
Markets performed well in May, do you see the positive trend continuing for the fourth straight month in June?
Markets are unpredictable and it is impossible to forecast what happens over a single month. The buoyant markets are a possible combination of lower energy prices and a view regarding the Fed's monetary policy stance being close to the end of the tightening cycle; as well as a belief that market valuations are more reasonable given the time correction that took place over the last 18 months
Less than 1 percent away from the peak, is June going to be the month when markets hit an all-time high?
The market momentum remains positive, and this would certainly continue. Investors however should not be swayed by market highs but assess their investments from a much longer time frame perspective.
What is your 2023-end target for Nifty? Will we see double-digit returns this year?
We do not have near-term targets on any indices. We are long-term investors and believe that markets will suitably reward investors who are patient and remain invested.
Compared to other emerging markets, do you believe valuations of Indian markets are fair?
Indian markets have always traded at a premium to emerging markets, and to that extent, the higher valuations you see today, are not out of sync with historical trends and are hence not a cause for worry.
What should be one's strategy with an all-time high so near?
The strategy should be to remain focussed on asset allocation, avoid getting carried away, and invest further only if you have a time frame of five years or beyond.
Which sectors one should avoid this year and which ones should they accumulate?
There are opportunities across sectors, and it is perhaps better to focus on individual companies and businesses rather than making absolute judgments on sectors. Broadly speaking, we remain positive on industrial and capital goods, banks, and consumer discretionary space.
What, according to you, is the perfect model portfolio in the current scenario?
The perfect model portfolio in any scenario is one that is anchored to the investor’s goals and aspirations. Beyond that, keeping your approach simple, staying with diversified equity funds, and adding long-term deposits to your portfolio given that rates are likely to fall in the medium term, would be the optimal approach.
One piece of advice for new investors.
Keep it simple, consider the SIP route, stick to basic diversified equity funds, and be patient.
