"Given the current global recessionary trends as well as a slew of banking sector issues primarily in the US, it may not be an opportune time to look at export-oriented technology stocks that cater to the banking sector in the global markets," Harshad Patil, Executive Vice President & Chief Investments Officer at Tata AIA says in an interview to Moneycontrol.
Before the banking crisis, CY 2023 was forecast as a year with sub-par growth on the back of slowing global trade and significant monetary policy tightening by the global central banks.
Now, the banking crisis has further strengthened this view and increased the chances of a global recession, says Harshad who has over 20 years of experience in fund management, research and dealing functions.
He believes the heightened volatility in equity markets is here to stay, at least in the near term.
Is it the best time to buy technology and pharma stocks?
Given the current global recessionary trends as well as a slew of banking sector issues primarily in the US, it may not be an opportune time to look at export-oriented technology stocks that cater to the banking sector in the global markets. That said, we are focused on the fundamentals of the company and are looking for bottom-up stock-picking opportunities in every sector.
Do you think the Federal Reserve will go for one or two more rate hikes this year before taking a long pause to assess the situation?
The Federal Reserve has guided for one more rate hike of 25 bps, followed by a long hold till the end of this calendar year. However, the US yield curves are pricing in rate cuts towards the end of the calendar year, contrary to the current guidance of the Federal reserve.
Do you really believe the recent banking crisis is over now?
It is prudent to assume that the recent banking crisis has been contained by the swift and timely actions of the regulators, but that does not mean it is firmly behind us. However, we believe that this crisis has a limited impact on our investment decisions in most sectors.
Considering the recent banking crisis, what are the chances of a global recession?
Even before the banking crisis, CY 2023 was forecast as a year with sub-par growth on the back of slowing global trade and significant monetary policy tightening by the global central banks. The banking crisis has further strengthened this view and increased the chances of a global recession.
That is one of the reasons why the market believes that the US Federal Reserve would need to lower the Fed funds rate towards the second half of CY 2023.
Do you advise investors to pick new-age stocks like Zomato and Paytm?
Recent corrections would remove some of the excess valuations on most of the new-age companies. However, we wish to reiterate that we look at the fundamentals of individual stocks irrespective of sectors. We would focus on the business models of the new-age companies on a case-by-case basis and take investment decisions based on the earnings capabilities as well as valuations. We would not comment on individual stocks.
Do you think the journey for the market from here on will not be easy? What are the challenges for the market in FY24?
We believe that the heightened volatility is here to stay, at least in the near term. We are all aware of the challenges faced by capital markets from muted global sentiments, lingering geopolitical tensions as well as domestic demand-related issues.
That said, we believe that the prolonged market consolidation seen over several months also presents stock-picking opportunities with a medium-term horizon.
What is the investment strategy for twin NFOs - New funds Sustainable Equity Fund & Dynamic Advantage Fund?
As we have seen in recent times, the markets are increasingly volatile. In such market conditions, the Dynamic Advantage Fund would seek to proactively optimise the asset allocation mix between equity and debt to protect the investment from extreme downside along with providing adequate participation in the growth of the Indian economy.
In recent years, there has been much focus on sustainable investing or ESG investing, with both Global and Indian Corporates focusing on a host of Environment, Social and Governance parameters. These Corporates tend to be rewarded by discerning long-term investors with better valuations, which augurs well for any long-term investment. The Sustainability Equity fund invests in those organisations that are more transparent in their practices and perform well on ESG metrices.
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