Surge in equities driven by expectations of V-shaped recovery in FY22: Aditya Birla MF CEO

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October 5, 2020 7:35 PM

The chief of the fourth largest asset manager said a V-shaped recovery will be possible in FY22 which is also leading to stronger bias towards buying equities at present.

For the mutual funds, he said the period of redemptions is behind the sector, adding that some dip in the assets under management (AUM) in a large industry should not be seen as a negative. (Representative image)

Equity markets are being fuelled by investors’ confidence in the Indian economy over a longer term and it is this buying amid easy liquidity which is leading to a perceived disconnect between the stock market and the real economy, Aditya Birla Sun Life AMC’s (ABSLAMC) chief executive A Balasubramanian said on Monday.

The chief of the fourth largest asset manager said a V-shaped recovery will be possible in FY22 which is also leading to stronger bias towards buying equities at present.

A surge in the equity markets after initial corrections due to the COVID-19 pandemic has led to concerns over a disconnect between the markets and the real economy, wherein the GDP has contracted by nearly a fourth for the June quarter.

The revival steps taken by the government and the central bank will result in a V-shaped recovery next year, Balasubramanian told PTI, adding, “What you are seeing in the market is coming on the back of that.”

When asked specifically about the perceived disconnect, he said, “I think we are looking at FY22 earnings rather than FY21 earnings.”

He said the volatility index for Indian markets has shown a downtrend recently and added that fears of a sharp correction are not getting reflected in it in anyway.

The company on Monday announced a special opportunities fund, which will look for companies across sectors and market caps for winners over a longer term period.

Balasubramanian said the pandemic has helped a few companies in digital, pharma and chemicals sectors, presenting growth opportunities.

The new fund offering opened on Monday and will be on till October 19.

For the mutual funds, he said the period of redemptions is behind the sector, adding that some dip in the assets under management (AUM) in a large industry should not be seen as a negative.

To a question on only a few stocks emerging as favourites, Balasubramanian said the activity is more broad-based in India unlike the select stocks-fuelled rally in the US markets.

He added that even the small-cap and mid-cap counters have seen higher activity in the last six months.

He, however, declined to comment on the Sebi circular on weightages in a multi-cap scheme, saying there is sufficient time to comply with it and added that the matter is still under discussion with the capital markets regulator.

Balasubramanian said that his company’s multi-cap fund has 65 per cent of its investments in large-cap stocks.

The heightened investor interest in equity as an asset class is representative of a greater interest in risk taking by Indian savers and they will also go through a “learning curve”, he said.

When asked if the MFs — which are seeing a dip in AUMs — are getting disintermediated, he said all investors cannot handle trading by themselves and hence the professional asset managers will be required.

The economic recovery will be supported by the rural activity, low interest rates and easy liquidity supply, he said, adding that the government will also be initiating more structural reforms like the ones seen recently.

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