"We remain optimistic about the long-term growth story that India offers"

One needs to look through short-term volatility and be disciplined in their asset allocation strategies to achieve their long-term financial goals, asserts Daylynn Pinto, Senior Fund Manager – Equities, Bandhan AMC.

The Indian equity markets are experiencing a drastic fall from their all-time high levels with heightened volatility. What are your thoughts on how Indian equities are positioned in the current macroeconomic environment?
Over the last two months, the overall environment for Indian equities has deteriorated at the margin. Firstly, earnings have come in softer than expected for the second quarter in a row leading to downgrades across sectors. Together with punch valuations, this has led to some readjustment of expectations going into the second half of the year. Secondly, the victory of Donald Trump as the U.S. President-elect has dampened expectations on the U.S. rate cut cycle given the view that his policies are likely to be more protectionist and inflationary in nature leading to a strengthening dollar and consequently a weaker Rupee.

While we remain optimistic about the long-term growth story that India offers, investors must brace themselves for higher volatility in the near term, given the growing uncertainties about global policies, geo-political issues, and lastly the current cyclical slowdown prevalent in India.  

Which sectors present compelling investment opportunities, given India’s economic trajectory?
We believe that Financials continue to offer a reasonable risk-reward at the current juncture. Other than Financials, we remain constructive on Healthcare, Realty, and Mass Consumption plays.

How do you manage the balance between maintaining quality and achieving growth, especially in challenging market conditions?
The investment process that we follow has a very clear definition of what every fund should do. We call it a fund casing, wherein every parameter of all our funds is very clearly defined.

While I manage several funds, you will see that clear parameters are defined for every fund. This exercise helps differentiate across funds and adds a sense of discipline to the investment approach. To give an example, I might be extremely bullish on mid and small caps, but I cannot have an 80 per cent allocation towards SMIDs in my funds due to the implementation of certain guardrails that prevent excessive risk-taking beyond a specified limit. These limits serve to instil discipline and risk management in the process of managing the fund.

A combination of these factors, particularly when managing multiple funds, helps us navigate effectively. That said, the core philosophy of the specific fund manager applies to all the funds. Regarding the stocks we choose and the sectoral bets we place, that is very personal.

In your view, how has the Indian equity market evolved in the last few years, and what role do passive funds play in this transformation?
The Indian market is ever-evolving as the economy continues to gain size and market participants continue to increase at a rapid pace. There is always a role to be played by a variety of financial instruments at any point in time and we believe there is space for both active and passive strategies to create wealth over the long term.

Given the current market dynamics, what would be your advice to retail investors looking to invest in equity funds?
We believe that one needs to be realistic about prospective returns as equity markets go through cycles. One needs to look through short-term volatility and be disciplined in their asset allocation strategies to achieve their long-term financial goals.

Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.