Retail investor response to market swings a key challenge ahead, says Sunil Subramaniam of Sundaram Mutual Fund

Sunil Subramaniam, MD and CEO of Sundaram Mutual Fund underscores the growing might of domestic investors. He highlights that retail investor behaviour during periods of volatility will be a challenge that could crop up in 2024 and needs to be appropriately addressed. In an interview with Mint, Subramaniam shared his views on the domestic market, economy and the upcoming Budget. Edited excerpts:

How has been the year 2023 for the market? Do you see any remarkable challenges for the domestic market in 2024?

The year has been a great one for the markets as domestic flows, especially the SIP (systematic investment plans) book, have been strong and giving buying support whenever FPIs (foreign portfolio investors) flows have slackened. 

There has been a sharp increase in the number of folios at the smaller end of the cap curve. 

Given that these are inherently more volatile than the larger caps – retail investor behaviour during periods of volatility will be a challenge that could crop up and needs to be appropriately addressed.

Also Read: Nifty 50 set to clock healthy double-digit gains in 2023; what are the key challenges for the market in 2024?

What sectors should retail investors bet on in 2024?

Consumption and banking and financial services should be the focus at the beginning and towards the end of the year – infra and capital goods depending on the progress in capacity utilisation and fresh capacity creation.

Also Read: Market momentum may continue in 2024; FPI money will continue to pour into India, says Ajit Banerjee

What could be an ideal portfolio for the coming year? Should we trim exposure to equities and increase exposure to safe-haven assets such as gold?

Yes, gold is a good investment option currently given the expectation of a prolonged two to three years rate cut cycle and consequent dollar weakness. 

The ideal allocation would be two-thirds equities and balance gold for those investors comfortable with some degree of volatility. For more conservative investors 50:25:25 for equity: gold: debt would be more appropriate. 

These views are for a five-year holding period. Anything shorter in time horizon is not recommended given the state of valuations.

What are your expectations from Budget 2024? Will it be a populist Budget ahead of the General Election 2024?

The Budget will largely be a non-event as it will be a Vote on Account and hence largely a report card with the election commission not permitting any major announcements on account of the ensuing general elections. That being said the fiscal numbers are likely to be in line with the budget estimates.

Also Read: Budget 2024: Govt to keep infra development, manufacturing in focus, says Sonam Udasi of Tata Mutual Fund

India's economic growth was impressive in Q2. How do you see the road ahead for the domestic economy? What measures can the government take to give further impetus to the economy?

The road ahead will largely be determined by the revival of consumption as that has been the laggard sector resulting in stagnant capacity utilisation and the resultant delays in the commencement of private capex in a big way. 

The government can continue its emphasis on infrastructure and also expand the scope of the PLI scheme to give further impetus to the economy.

The debate over the state of the US economy is gaining momentum with many believing the world's largest economy will face a slowdown in 2024. Should we be worried?

Slowdown in the USA is a given. How strong is the slowdown is what needs to be tracked – a soft landing will avoid a lot of pain but prolong the mild recession but a hard landing will lead to a sharp correction but an equally fast and strong bounce back. 

A prolonged slowdown is not good news for our exports and the PLI scheme's success whereas a hard landing and swift recovery will mean more short-term pain but sustainable export growth for India in the medium term. The stock markets will feed off this.

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The RBI has raised India's growth forecast but kept the inflation projection unchanged. How do you see the inflation trajectory panning out from here on?

I see the inflation trajectory as stable with a sharp fall in the second quarter due to fiscal measures the government will take (release of food grain and vegetable stocks through the Public Distribution System and a possible Petrol price cut as the international oil outlook is stable.)

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.