In an interview with Puneet Wadhwa, ING Investment Management Vice-President and Head (Multi-managers) Arvind Bansal says global assets, including global commodity funds, could be a good bet for Indian retail investors
The Indian equity markets have lost considerable ground on account of domestic and global factors. How long would it be before we see some stability returning?
The domestic factors have been largely the reason for the recent underperformance of India vis-à-vis other emerging markets and the developed world. These factors were political risk and inflation.
However, the political risk has reduced. Inflation, though, though continues to be a problem for India, as we import commodities, including oil, and are vulnerable to increase in international prices. However, we believe that inflation is a global phenomenon with many developing countries facing the same issue.
In our view, stability has returned to the markets as the domestic factors are being addressed proactively by the government. After the fall of about 15 per cent from the top, Indian markets are stabilising at the current levels.
The key triggers would be price of oil, inflation and results of state elections. If oil and inflation levels come down, there could be a rally.
Where do you see the inflation and interest rates in the near to medium term? Do you expect the Reserve Bank of India to raise rates in the upcoming policy review on March 17?
We are in a structurally high inflation environment because of the large global liquidity and money chasing few assets. This, coupled with lower interest rates globally, has made commodities dearer, affecting all asset classes.
With oil above $110 a barrel and India still meeting its energy needs largely through imports, we don’t think inflation and interest rates are going to come down in the near future.
Our expectation is that RBI would maintain its monetary stance of increasing policy rates. However, given the recent drop in the Index of Industrial Production (IIP) numbers in the last few months, the forward view may not be that aggressive.
How have you churned your portfolio in the last three-six months? What are the sectors that went out of favour and which ones got included? Are you completely invested at current levels?
Ours is a multi-manager portfolio and our managers take the call on the sectors. We decide on allocation to managers and the managers manage according to their own style.
Recently, we have increased our allocation to largecap managers. Overall sector allocations are very close to the benchmark. We are completely invested at these levels.
Gold and silver prices have been touching new highs? Do you expect the rise to continue? Can one buy them from a medium-term perspective?
We believe, as long as the monetary stance remains easy globally, with paper currencies losing their value, the real assets, including gold and silver, should structurally be in bull-run on the longer-term basis.
There are no indications of reversal in monetary policies. So, we think the rally would continue and one could allocate part of the portfolio to these precious metals.
What is your advice to retail investors, given the current market conditions? Should one remain in the sidelines or is the time ripe for cherry picking?
Our view is that an Indian investor has all his money invested in India. He needs to put money into global assets including global commodity funds.
