Inflation is likely to rise but may stay around 5% +/- 1%

 



Chandraprakash Padiyar, senior fund manager, Tata Asset Management



 

 

 

 

 

“If crude price corrects from current levels below $70 then Rupee could appreciate along with pressure of interest rates going away”, said Chandraprakash Padiyar, senior fund manager, Tata Asset Management, in an interview with Anjali Raulgaonkar (https://theeconomistzone.blogspot.com/)

 Excerpts:

1.      Net inflows into domestic equity mutual funds fell 11.4 percent month-on-month to Rs 8,375 crore in August. what can be the possible reasons behind it besides profit booking? What are the expectations in coming months?

Sequential movement in flows may not be the right data point to focus at. On an absolute basis Rs. 8000 crore + monthly net inflow is by itself a fairly strong number. FY18 was actually a strong year for flows and hence FY19 numbers in comparison looks lower. SIP book continues to remain robust and hence likely to see flows being stable going forward.

2.      What is your outlook on Rupee?

Rupee outlook depends on many factors i.e. interest rates, GDP growth, inflation, global interest rate environment, purchasing power parity equation etc. Current economic environment does point towards a depreciating bias towards the Rs along with higher interest rates. Crude price would be the key for this outlook. If crude price corrects from current levels below $70 then Rupee could appreciate along with pressure of interest rates going away.

3.      How has the fall in Rupee impacting returns on mutual funds?

Rupee fall directly does not have any bearing on mutual fund returns. Indirectly, on an overall basis it impacts positively on earnings growth given the benefit it leads to for sectors like IT, Pharma, commodities etc.

4.      What is the fund house new strategy in current scenario of falling Rupee, rising inflation, mixed equity market returns?

We are more focused on bottom up business ideas than sectoral views. We are constantly reviewing all our investee companies to see if any business can be negatively impacted. As of now, my view is that our portfolio benefit from this trend in general. We do not own businesses which have any major leverage on the balance sheet and infact all are free cash positive.

5.      What is your outlook on inflation?

Inflation is likely to rise but may stay around 5% +/- 1%. More focused on core inflation.

6.      How are you approaching market right now? What is your outlook for the market?

Rangebound market outlook for the immediate 6-12 months. Positive over a 3-year view. We are more focused on stock specific ideas with a bottom up approach.

7.      What kind of stocks you avoid, why?

Growth at reasonable price is the investment philosophy. We look for businesses where we expect profit growth of 20%+ CAGR over 2-3 years minimum along with strong balance sheet i.e. ROCE > cost of capital and available at reasonable valuations. Typically avoid Global Commodity related sectors like metals.

8.      Money flowing through the SIP route is holding up. So, should the investor only go for SIPs?

Investments in Equity as an asset class continues to be quite low and hence one should certainly invest in equity mutual funds. Choice of SIP or lumpsum will depend on the time horizon, financial goals and amount to be invested.

9.      Given the dynamic economic and political situation, how can investors minimize their risk and maximize their returns?

Take an asset allocation approach with exposure split between Equity and Fixed income. Look at long term (preferably 10 years+) and be disciplined in terms of the allocation. Short term volatility should be used as a good entry point rather than risk.

 

The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you. Please consult your Financial/Investment Adviser before investing. The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund.

 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.