Money invested now will generate wealth from a 3-5 year perspective: Vinit Sambre of DSP MF

Mutual fund investors are concerned about the current market conditions. They are confused about all the talk of steeper rates, slower growth rate, possible recession. Shivani Bazaz of ETMutualFunds reached out to Vinit Sambre, Head-equities, DSP Mutual Fund, to make sense of what is happening in the market. “ honest and responsible money management require us to caution the investors when time is not right. However, we now believe that it is a good time to accumulate units for long term,” says Sambre.
Edited interview.

The US Fed is likely to go for steeper rate hikes. How will it impact interest rates in India as the Fed often set the tone for central banks across the globe?

It is quite clear that the Fed will hike rates in the coming policy. However, the Fed has not gotten itself a soft landing in the past. Our sense is growth will slow down much faster and therefore Fed will have to take a pause on rate hikes sooner than expected. Inflation is expected to take a downturn from hereon which will facilitate a pause further. Domestically, I think rates can go up to 5.75-6.00% before the RBI decides to pause. In my opinion, this level of rates will be good for stable currency and macros.

Will it result in more outflows from India? Conventional wisdom has it that higher yield on US treasuries result in outflows from emerging markets.
India has net outflows of USD 36 billion this cycle that started in October 2021. This is an extreme reading and is a combination of many factors, including sucking out of global liquidity and geopolitical issues. We believe FII outflows will reduce hereon. India has the most solid fundamentals in the Emerging Market basket and is likely to attract flows as the earning season begins. The intensity of outflows has already slowed in July thus far. We believe that Fed and RBI will hike rates together and therefore further pressure on flows because of rates is unlikely.

High inflation and interest rates are considered extremely negative for the markets. How do you view the situation?
Base metals are down ~30% from the top, inventory is increasing, crude oil fears are receding as price trends downwards and supply chain is easing fast. We believe inflation is likely to peak out and there will be opportunity in select sectors. It will be important to build portfolio in these sectors that will benefit from margin expansion as inflation recedes. We believe banking, auto, cement and healthcare stand to gain in the current macroeconomic environment.

Professional fund managers have been asking individual investors to be cautious for the last six months or so. What is your view?
Yes, honest and responsible money management require us to caution the investors when time is not right. However, we now believe that it is a good time to accumulate units for long term. While this may not be the year of equities and markets may dwindle sideways for longer, money invested now will generate wealth from a 3-5 year perspective. An asset allocation-based disciplined investing is all-weather investing, and I will advise investors to stick to it.

Investors are really worried about their investments in mid cap and small cap schemes. What is your advice to these investors?
Mid cap and small caps by nature are more volatile but are also known for creating wealth over long term. Investors investing in this category should have appropriate allocation depending upon their risk-return profile and have long term horizon. With the recent correction, some pockets, especially the small caps are looking reasonable in terms of valuations for building exposure.

IT schemes are under pressure. With talk of recession the future looks bleak for the sector. How do you view the scenario?
The recession could lead to some slowdown in the business over next 2-3 quarters which could drive down the growth expectation from the sector. However the recent correction specially in the large cap IT basket is pricing these concerns adequately. Out long term outlook continue to remain positive as the digitisation theme would continue to drive growth for Indian IT companies.

What is your advice to mutual fund investors at this juncture?
The biggest advice is to stay invested and reduce narrative-driven activity. We are building exposure in the sectors that look good and that will eventually reflect in performance. MF investors need to sit tight through this phase and that will eventually reflect in good wealth in the long term.


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