With gold falling out of favour and debt not expected to replicate the returns generated in the last year,equities are expected to emerge as the performer in the long term even though they face turbulence in the near term. A Balasubramanian,CEO,Birla Sun Life AMC tells Sandeep Singh that structural changes being brought in by the government will do good to long-term equity investments. He also said that India will continue to attract a disproportionate share of FIIs in emerging economies: Excerpts
How do you see the current volatility in the markets and where do you see the equity markets headed?
Post Ben Bernankes statement,the global market has turned volatile but it is part of their roadmap to get back on growth. There has been an improvement in the global economy; job data has improved,there is better economic and growth data for the US and the central banks had adopted an easy policy approach both in terms of interest rates and liquidity to keep the growth going. Now they are preparing for a gradual shift from that policy because of improvements on various accounts.
While markets have been volatile on that front,I think they should take cognizance of the fact that the US Federal Reserve is looking at a gradual shift in stance.
How do you see India faring among all this?
The monsoon has been good and that should lead to a better agricultural production and also various measures such as gas pricing policy,allocation of coal,changes are structural in nature. One may argue that they are delayed but still we need to admit that they are being proposed and implemented and will help in long-term orderly growth. While the rupee has been under pressure and there are concerns on current account deficit,steps are being proposed by regulators and the government to address the currency volatility.
What does this mean for investments?
The phase should be seen as temporary and from an investment point of view,one must look at the long-term opportunity. All structural changes that are being brought in will only make the system more robust and this can only be good for long-term investments. Market immediately discounts all uncertainties and negatives and takes the positives with a lag.
So any positive development,will take its time and manifest as performance of equities. Unilevers open offer is also an endorsement of India story.
How do you see the
governments measures to discourage people from buying gold?
Investors should look at how much they should invest in gold,equity and fixed income and keep asset allocation in mind. Gold as an asset class has been an underperformer over the last 1-2 years and those who chose to invest in it will now see the necessity to diversify. I think that the incremental growth in gold investment will reduce and money will get diverted into equity and fixed income products of mutual funds.
What are the risks you see for the Indian markets?
Rising interest rates globally is a concern. Many emerging economies had reduced their rates continuously and are now raising their rates. While that was not the case for India and our reduction in rates was gradual,a rise in interest rates globally poses some threat that cannot be ruled out for India too. Also if global markets show substantial recovery,there may be concerns on fund outflow by foreign institutional investors. However,we may still remain a favourable destination for overseas investors due to domestic consumption and strong corporate fundamentals.