Even as we continue to witness heightened volatility in the stock market on the back of a confluence of domestic and global factors, eventually value accretive earnings growth by the corporations will be the key driver for performance, says Gaurav Misra of Mirae Asset Global Investments. A stable macro environment and a healthy GDP growth rate, will provide the backdrop for a pick up in earnings growth rate, he adds. “At the current moment it looks like global concerns on trade wars, growth outlook in US and China will not be a cause of major concern for the next few quarters at least,” he says.
Sushruth Sunder of FE Online recently interviewed Gaurav Misra, Senior Fund Manager, Mirae Asset Global Investments (India), who shares his outlook on the stock market; equity mutual fund inflows; and guidelines for creating an asset allocation mix.
The stock markets have remained volatile despite the recent Budget SOPs and RBI rate cut. What is your near-term outlook on the stock markets?
Markets could be volatile in the near term. There are domestic political events which are to unfold which might cause short term volatility. There can be unfavourable global cues as well, however at the current moment it looks like global concerns on trade wars, growth outlook in US and China, etc. will not be a cause of major concern for the next few quarters at least.
What factors would drive the stock markets going forward?
Eventually value accretive earnings growth by the corporates will be the key driver for performance of markets. A stable macro environment – range bound inflation, stable interest rates, achievable fiscal deficit targets and healthy GDP growth rate, will provide the back drop on which a pick up in earnings growth rate will drive the markets.
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The equity mutual fund inflows have fallen to a 2-year low in the month of January. What is the likely trend going forward?
We are more hopeful of inflows into mutual funds. This will be sustained by SIP inflows, which have held on, even in the recent months. SIP inflows in excess of 8,000 crores remain robust and will be the backbone for the MF industry. We believe investors are waiting on the sidelines for the key political event-General Elections, to decide on future allocations, and flows should revive once the outcome is out of the way. However based on past instances we have seen that growth remains strong during election years and markets also tend to do well, hence we would like investors to keep the disciplined investing process on.
What advice would you like to give to retail investors investing through SIPs?
We believe SIP or STP is the best way of investing as it provides discipline of investment as it makes volatility work for you, by averaging your cost of investments. We believe that investors need to make SIP investments with a Goal in mind. When doing goal based investing, investors move from being return chasers to goal chasers. Also in case of market corrections, investors should do SIP Top up to take advantage of the volatility.
In your view, is it better to invest in large-cap funds relative to mid-cap funds?
Investing should always be done with a long term perspective. India offers a good opportunity across the large to midcap spectrum. Current Valuations have also become reasonable. Priority for new investors should be to start with the larger cap category as a core and then move into the mid cap category.
How should investors go about while choosing funds to invest in? What factors should they consider?
First, Investors should focus on their own investment / objectives. From there they will have to derive the investment horizons for each objective and choose the appropriate fund (keeping in mind current valuations – the opportunity set increases from large to mid and multicap funds). Choose Investment Houses which have a focus on process driven research and investment function. Investors should take help of financial advisors while making their investment decision.