stock market strategy: ETMarkets Smart Talk: Want to time the market? Consider Balance Advantage Funds: Suresh Soni

“For those who want to time the market by increasing or decreasing the allocations between asset classes, I have a simple suggestion-Do consider Balance Advantage Funds,” says Suresh Soni, CEO, Baroda BNP Paribas Mutual Fund.

In an interview with ETMarkets, Soni who is a seasoned asset management professional with a rich experience of over 25 years, said: “SIPs remain popular and continue to grow, both in terms of a number of accounts as well as gross amounts. Recent mutual fund NFOs, including our flexi cap fund, have seen healthy inflows” Edited excerpts:

What is your view on the US Fed policy meeting? How will it impact India?
India has already felt and may continue to feel the 2nd order effects of a tight US monetary policy. Rising global rates limit the autonomy of Indian monetary policy.

Also, a potential slowdown in the US consequent from aggressive rate hikes can cause a slowdown in Indian exports and adversely impact sectors like IT and Pharmaceuticals.

A slowdown in exports also adversely impacts the current account deficit and causes some pressure on the Indian rupee.

Having said that, India is much better placed than major world economies due to strong domestic demand, and the Indian rupee has been one of the best-performing currencies on a YTD basis.

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Over the past few years, the Indian economy has become a lot less susceptible to external shocks.

Do you see further tightening by RBI and will that derail momentum on D-St?
Indian CPI inflation seems to have peaked, though it yet stays above the RBI’s comfort zone. RBI has been aggressively raising rates and current policy rates are above pre-pandemic levels.

Given the persistence of inflation and expected rate hikes by global central banks, we expect RBI to continue raising rates, albeit at a slower rate going forward.

We believe the market consensus factors in continuing rate hikes by RBI and as such do not expect that a rate hike at coming policy will spook the market.

One will however be watchful not only of the rate action but also accompanying commentary from RBI to understand future direction.

MF data is encouraging when it comes to equity funds but the pace seems to be slowing down. More money is moving towards debt – why are investors putting money in safe havens?
Equity funds continue to witness healthy flows. SIPs remain popular and continue to grow, both in terms of a number of accounts as well as gross amounts. Recent mutual fund NFOs, including our Flexi cap fund, have seen healthy inflows.

The Debt funds’ AuM – ex overnight and liquid funds, has actually shrunk – from about Rs 9.2 Lakh crore in March 21 to Rs 7.85 lakh crore in August 2022. This was due to volatility in debt funds due to rising rates.

We believe that investors with a medium-term horizon should consider short to medium-term funds and credit risk funds.

Sensex reclaimed 60K recently while Nifty50 also managed to hit 18000 for the first time since April. The recent price action makes benchmark indices vulnerable to profit booking. Where do you see markets in the medium term?
At a time when global markets are experiencing heightened volatility, India is faring quite well thanks to robust domestic demand.

All our high-frequency indicators like GST collections, auto, and home sales, and bank credit growth are pointing towards healthy growth in the economy. As we enter the festive season, we continue to see strong consumer demand and economic activity.

In terms of flows, we continue to see strong domestic flows. Lately, FIIs have turned into net buyers too. Aided by consistent domestic demand and revival in FII interest, Indian markets seem to be well placed.

However, markets are always prone to volatility and triggers can come when least expected. Aggressive rate hikes, geo-political risk and commodity price volatility can pose risks to the market.

In a summit, FM asked India Inc. why they are not getting into manufacturing. Do you see an increase in buying interest in this sector?
The Government of India has been promoting India as a manufacturing destination and has been taking a lot of steps to incentivizing businesses, like the concessional income tax rates for corporates and the PLI scheme to encourage the corporate sector.

The Prime Minister at the recent SCO summit in Uzbekistan also said that he wants to transform India into a manufacturing hub.

We believe that investments would continue in the manufacturing space, the recent announcement of a large semiconductor plant in western India being an example of such activity.

Which sector will produce the next set of multibaggers?
Multi-baggers are a result of

a) high growth rates and

b) re-rating of companies. It, therefore, implies that the companies must have visibility of high growth rates for a prolonged period without sacrificing margins and there must be management teams that execute it well and are trustworthy.

We, therefore, consider this to be more of bottom-up ideation rather than a sectoral approach.

Please share your investment mantra. Any checklist you follow before buying the stock?
We are primarily growth investors. We seek to invest in companies and businesses which can potentially grow at a faster rate than their peers for significantly long periods of time.

Our in-house investment framework BMV (Business – Management – Valuation) helps us in identifying these companies. We seek growth businesses that are available at reasonable valuations.

The quality of management is an important determinant of the success of growth companies. The ability of management to deliver across the market cycle on multiple metrics along with best-in-class corporate governance remains a key touchstone for our portfolio companies.

We have a robust research process and debitive culture. Also, we have a strong risk management process.

How important is booking profits in MFs or direct investing? Or should one adopt a buy-and-hold strategy
We believe the greatest value to be created from equity investments is by staying invested for the long term. You must give time to your investments to compound your wealth.

We advocate staying invested for the long-term rather than trying to time the market. The holding periods in mutual funds should be determined by an investor’s financial goals and risk appetite rather than short-term fear of volatility or greed induced by recent outperformance.

Markets do experience extreme fear and exuberance at times and emotions can come in the way of investing. Best way to invest therefore is to do systematic investments-spread your investment over time.

For those who want to however time the market by increasing or decreasing the allocations between asset classes, I have a simple suggestion-Do consider Balance Advantage Funds.

These are the funds that have the flexibility to increase and decrease equity exposure based on market valuations. Let your fund manager actively manage the allocations for you.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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