Harshad Patwardhan, Investment manager, Equity, JP Morgan Asset Management, tells Dipta Joshi long-term retail investors should buy even as the markets fall. Excerpts:
What is your assessment of the current volatility in stock markets?
Inflation and liquidity are both challenges. Lower liquidity will impact profitability as accessing funds at affordable rates may get tough. No business was conducted in the last session of Parliament. The 2G and CWG scams do not inspire confidence.
What impact will it have on FII inflows?
It’s possible that this calendar year will see less FII investment than last year. But to conclude they are not finding Indian markets attractive is premature. We expect India to grow at a significant pace and maintain its attractiveness for international investors.
Negative news flows will have some impact on investors with a short-term horizon. Most medium to long-term investors know that investing in emerging markets comes with the risk of such uncertainties.
How does the small investor survive such a market?
Things are not looking great, at least in the near term. But the market has corrected, so some part of the bad news has been factored in. Post the Budget session, things could change for the better. Getting out of the market in panic would be a big mistake. For those with a long-term horizon, this could be a buying opportunity.
What’s your view of the corporate results announced?
A mixed bag. While the revenue growth is fairly strong, margins generally seem to be under pressure. For a broader universe of companies, revenues are up about 28 per cent while earnings are up 25 per cent year-on-year on an aggregate basis. The picture could easily change as there are quite a few companies yet to announce results.
Sectors you are bullish on?
We are positive on the consumption theme as opposed to infrastructure or the investment sectors where government decisions will make a difference. We have turned positive on the commodity front too, since analysts have upgraded the US GDP forecasts for 2011. However, this might be a negative for the margins of Indian companies that use these commodities and cannot pass on the costs.