'Equities will continue to be rewarding'

The financial year 2021-22 is likely to witness strong economic growth and long-term investors who can ignore market movements would benefit, Ravi Menon, CEO, HSBC Global Asset Management, India tells ET Wealth.What is your assessment of the current market scenario and economic recovery? The dichotomy between market indices touching new highs and current GDP numbers can be baffling. But if one were to look at the forecasted GDP numbers, may be not so. The marketplace is forecasting rising earnings. Skeptics may say analyst’s early numbers are invariably moderated downwards. They are right. But in the current year, earnings have surprised on the upside. Let me quote Aswath Damodaran who said: “Markets are not a reflector but a predictor of economic activity”.The disruption will pave way for interesting themes. One is that of accelerated digital adoption by consumers as well as enterprises. We see telecom, internet economy, ecommerce, technology vendors, etc. benefitting from this disruption. Another long term theme is of diversification of the global supply chain due to ‘China + 1’ strategy which could be adopted by corporates as well as economies and India could benefit. We would position our portfolios to benefit out of these themes in the medium to long term. In the short to medium term, we would be focusing on earnings growth surprises. Is interest rate down-cycle on its last leg? What should one expect from debt funds?Interest rate moves in a cycle but we think terming it as on the last leg is a bit preemptive. While the central bank has done a lot in terms of supporting the market, the space for further action is perhaps constrained. While short-end funds tend to do well with respect to consistency and volatility, their ability to generate return in a falling interest rate regime is limited. Similarly, while long duration strategy tends to be higher in terms of volatility, their ability to generate capital gains is much higher when interest rate is moving down. The preference of allocation comes from individual’s risk and return appetite.

from Economic Times https://ift.tt/3qLSFF4