Mr. Harish Krishnan

Sr. Vice President & Fund Manager

Mr. Harish Krishnan is a CFA, PGDBM (IIM Kozhikode) , B.Tech (Electronics & Communications). He has a has 16 years of experience spread over Equity Research and Fund Management. Prior to joining Kotak Mutual Fund, he was based out of Singapore and Dubai, managing Kotak's offshore funds. He has also worked at Infosys Technologies Ltd in his earlier stint. He is a Bachelor of Technology (Electronics & Communications) from Government Engineering College, Trichur, a post Graduate in Management from Indian Institute of Management, Kozhikode and a Chartered Financial Analyst from the CFA Institute.

Q . Please share your opinion on the current market volatility. How long do you think this may continue and at what levels will the markets be likely to be stabilized? How do you see the pace of economic recovery happening in India? Do you foresee any challenges going forward?

Answer : We have had a dream run of sorts, from lows of March 2020 till recently, and recent market volatility is the first instance where markets have corrected. While there are multiple reasons that can be attributed to the same (interest rate hikes, inflationary pressure, geopolitical developments, FII selling etc), we think it is good that markets are digesting the gains of such a large one-sided move. A lot of these factors – especially elevated commodity prices are likely to impact margins of many corporates, and so we may see a stalling of earning upgrades in the near term. However, in our opinion, these are transient headwinds, fundamentally health of corporate India is one of its best shape in last 20 years. Focus on spending on infrastructure, housing, manufacturing, export initiatives (PLI/China +1) all present long term opportunities. Given this, we think this opportune to allocate to Indian equities

Q . Does this volatility represent an opportunity for investors or is there more likely to be pain? How should investors play this out?

Answer : In our opinion, investors need to view equities from a longer term construct. While near-term issues does induce uncertainty, and one can potentially see higher volatility, we recommend investors to focus on their goals, equities are great avenues to solve for longer-term goals, and for such mandates, we suggest investors to use this volatility as an opportunity.

Q . If there are disruptions in the global supply chains, especially for oil and gas, what impact will it have on India?

Answer : Commodity as an asset class is more driven by near-term supply and demand, while equities as an asset class is generally more driven by longer term factors of earnings growth, cash flow over cycle etc. Given this, near-term supply constraints have pushed up commodity prices significantly. Indian is a net energy importer, and thus will be impacted negatively. Globally, higher energy prices will impact upto 2% of GDP, similarly, food and fertilizer prices and basic commodities like metals will also see 1.5% to 2% of global GDP impact. Poorer countries tend to have higher proportion spent on basic commodities compared to richer countries, and in this context India will see some demand moderation in other categories as more money will be diverted as a country to secure these basic resources.

Q . How is your fund house playing the current markets and volatility? Which sectors /segments are you underweight and overweight?

Answer : We have a longer-term orientation in portfolio construct. While near-term commodity prices are elevated due to supply shocks, we think users of commodities have got impacted significantly, and thus presents an opportunity to increase allocation to such sectors (like auto, consumer etc). We are also positive on infrastructure and manufacturing, as well as export beneficiaries, while underweight commodities, utilities etc

Q . What would be your advice to investors at this point in time?

Answer : Volatility is a feature of markets and not a bug, more importantly, it doesn’t come announced. Thus, it is important not to be perturbed by volatility but to use volatility to your advantage. One such approach is asset allocation, where basis your goals, you diversify across asset classes and use such bouts of volatility to rebalance, and increase allocation to equities as an asset class. Ultimately, time in the market is more important than timing the market – so please be patient and give your investments time to help reach your goals.

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