In conversation with, Satish Ramanathan Chief Investment Officer - Equity JM Financial AMC

"Equity markets are a great way to build long-term wealth"

"Equity markets are a great way to build long-term wealth"

Satish Ramanathan
Chief Investment Officer - Equity
JM Financial AMC

With high levels of inflation expected to persist in the near future along with more potential rate hikes, what is your outlook on the Indian equity markets in the short to medium term? 

We expect inflation to ease as energy prices pull back due to the onset of summer months. There are also signs of US consumer and housing slowdown indicating that demand-led inflation is behind us. However, With China opening up, there may be some commodity restocking taking place which could push up the commodity prices. Also, central bank actions may lead to excessive tightness and liquidity constraints which could lead to a volatile interest rate regime. So yes, inflation may have seen its peak, but the trajectory remains uncertain. The Indian equity markets are still expensive relative to other emerging markets, So, on a short to medium term basis the equity markets could be volatile.

Which sectors according to you are well-placed for 2023?

We believe that capex-oriented businesses along with financials in general are well-placed to capture growth. 

What is your outlook for the Q3FY23 earnings season?

Earnings will be more difficult to predict as there are a lot of moving parts such as input cost volatility and higher finance costs. We expect earnings momentum to come down over the next few quarters but improve into FY 2024.

JM Value Fund has proved to be a star performer in the last six months. What has led to such an outperformance over its peers as well as its benchmark? Kindly throw some light on the fund’s investment philosophy.

JM Value Fund has the right combination of value with growth.As a growth-oriented fund house our underlying philosophy has been to own companies that have a runway of growth that fit into our value paradigm. So, our filters include growth, capital efficiency and valuation parameters. This along with our patience in turnaround of contrarian stocks has served the fund well. 

What are the emerging trends you are witnessing among mutual fund investors? Also, how should retail investors navigate the current market volatility with mutual funds?

Mutual funds will continue to play an important role in building a savings pool for retail investors. As mutual funds become more mainstream, we can expect debt, equity and hybrid products and other innovations come through helping investors build better risk-adjusted portfolios. We continue to highlight that SIPs will help investors navigate any slowdown in equity markets. Incremental allocation to Debt Funds may also help reduce volatility. Asset allocation discipline is very important tool in times of volatility. As regards emerging trends, we see app-based analytics and investment tools as a great cost-efficient way for investors to build their portfolios. 

Over the span of your career thus far, what have been your key learnings from equity markets?

Equity markets are a great way to build long-term wealth but one needs to be patient. Volatility and extreme pessimism will test your conviction but one should stay the course. India being a developing country and low per capita GDP of just over USD 2,000 is at the cusp of a multiyear growth. Every country will have its unique trajectory of growth and as a fund manager it will be our endeavour to identify good or great businesses at reasonable valuations to participate in the growth story called India.