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In an interview with MintGenie, S Naren, ED &amp; CIO, ICICI Prudential AMC said he believes the markets will continue to be volatile in the near term. So investors should focus on largecaps and stick to mid and smallcap investing via SIPs only.

What is your medium-term outlook for the market? As most negatives are already there in front of us, should we expect the market will take headwinds in stride and move ahead?

The equity market is likely to be volatile till the time global central banks, especially the Fed, are done with tightening. However, this does not rule out the possibility of periodic relief rallies in the interim. As and when the Fed moves to an easing framework, the market is likely to recover and there is a possibility of meaningful rallies at that point in time. It remains to be seen when the central banks will end tightening and start easing.

What is your view on the trajectory of rate hikes? How could RBI balance growth and inflation?

We are believers that there are rate hikes in the anvil over the next few policies. After that, it will be dependent on data and how the monsoon, Ukraine- Russia conflict and global developments, etc. plays out.

Foreign investors have been taking money out of the Indian market since October 2021. Why have FPIs lost faith in the Indian market? For how long this trend may continue?

India remains one of the most structural markets in the world. Hence it will be incorrect to say that FPIs have lost faith in the Indian market. The challenges today are coming out of the fact that the US is increasing interest rates which is linked to the Fed fighting inflation. In fact, it is totally unconnected to the Indian market. Currently, FPIs are a bit more positive on commodity-oriented markets, which benefit from higher commodity prices than commodity-using markets like India.

What are the sectors that investors should focus on at this juncture? Believing that the market may see volatility for some more time, would you recommend sticking to the largecaps and avoiding mid and smallcaps?

We believe markets will continue to be volatile in the near term. So investors should focus on largecaps and stick to mid and smallcap investing via SIPs only.

Please help us understand how you see the trajectory of the rupee in the next one year. RBI has tools to support the rupee but the depreciation of the rupee will eventually help the RBI as it increases the value of forex reserve. Do you see the rupee beyond the 80 per dollar mark by the next year?

Thus far, the Reserve Bank of India’s handling of the policy in 2020 has helped the economy significantly. Going forward, we believe that the rupee should be allowed to depreciate along with other emerging market currencies since rupee appreciation against emerging market currencies weakens Indian exports.

Q4 earnings were mixed. What sectors met your expectations and what all were disappointing?

We believe Q4 earnings were reasonable and it was in line with our view that some of the commodity sectors and banks would be reasonable and some sectors where commodities were input would get hurt. So we were comfortable with what we witnessed.

Disclaimer: The views and recommendations made above are those of the analyst and not of MintGenie.

Market volatility to continue, stick to largecaps, says S Naren of ICICI Prudential AMC

<ul><li>Naren said FPIs are a bit more positive on commodity-oriented markets, which benefit from higher commodity prices than commodity-using markets like India.</li></ul>

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