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Home / Money / Personal Finance /  Why experts say India is much better placed now than global markets

A cocktail of bad news in the form of inflation, the Russia-Ukraine war, rising crude oil prices and US Federal Reserve rate hikes have lashed markets, globally. Mint asked a panel of experts whether this is a market for buyers or sellers. Here’s what Dalal Street mavens Shankar Sharma, vice-chairman and managing director (MD), First Global; Nilesh Shah, group president and MD, Kotak Mahindra Mutual Fund; Deepak Shenoy, founder and CEO, Capitalmind; Nikhil Kamath, co-founder, Zerodha; had to say about the selloff by foreign investors, opportunities in this market and the ways to make money. Edited excerpts.

Will correction last longer? 

Kamath: Indian markets seem expensive and even today on a relative basis, we have corrected lesser than other countries. Generally, in market cycles, things get a lot worse before they start to get better. Over the next two years, there will be more pain and the pain will last long. 

Shah: A lot will depend upon how various global events will shape up. What if tomorrow there is a political solution to the Ukraine-Russia war, and oil prices come down. In that scenario, certainly, the market outlook will be brighter. 

Shenoy: I am very bullish longer-term, but I just don’t feel that right now,  (market condition) is great. Excess liquidity has come down by about 5 trillion in the Indian economy. In such a situation you can be bullish about the economy, but the markets will not perform correspondingly because liquidity is what drives the market. 

Is India better placed? 

Sharma: Our debt-to-GDP and twin deficits are on a very worrisome path. And it can only worsen from here, given where the rupee is headed, which I think will be sharply lower.  India is the least bad option for an investor who can invest globally. 

Kamath: We have three or four big issues. The trade deficit has been a problem, and ever since the rally in crude and commodity prices, it’s becoming a bigger  issue. I don’t think it will take a long time for India to run out of reserves. Inflation and a general slowdown are other issues. 

Shah: We are in a far better situation despite current challenges compared to other countries. 

Can DIIs cover FPI/FII selling? 

Shah: FPIs continued to play an important role in our market; we need to augment domestic and global capital together to pursue higher growth. 

Shenoy: The retail investor continues to drive the trading volumes in the market. We haven’t seen a liquidation level of selling from foreign investors yet. If that happens, then we’ll actually see whether domestic players are able to offset in any meaningful way. 

Sharma: FIIs are getting out of stocks where they can get out. The interesting thing is that those are precisely the stocks that investors should not be buying because they are actually overvalued stocks (for example, banks). 

Are there any pockets of opportunities in India?

Sharma: The under-owned part of the market by FII is really the smallest cap part of the market. We are in a bear market where you will have to work harder to get to those 25-50 small-cap companies. In my view, a year from now, many of those companies would be significantly up. 

Kamath: Smaller cap companies also tend to have a lesser moat around them. They’re not generally sitting on a lot of liquidity and are a bit more leveraged than larger-cap companies. If markets were to go down by another 20%, I wouldn’t be surprised if smaller cap companies are more strained than larger companies, which have a bigger moat in place. 

Can asset allocation help investors?

Shah:  If you’re an investor looking for a long-term investment, asset allocation funds are like ‘fill it, shut it and forget it’ kind of fund. It ensures that in a cheaper market, you are adding asset classes and, in an expensive market, you are booking profits. 

How can investors make money in the long run?

Kamath: In the future, we might arrive at a point where growth comes at a cost where we need to justify the cost of the environment.

Sharma: I still believe we are in a bear market. If you look at the compounded returns from January 2008, up until now, we are still barely in the 8-9% kind of territory, which is nothing for a high-interest rate economy like India. So, to that extent, we are better off because things that do the best do the worst in a bear market. That’s why I think on a relative basis, India (also China) is absolutely the best market that I can see. 

Shenoy: I would say India has a tremendous amount of inefficiencies. All of these inefficiencies, whether it is in the logistics, transportation, or in communication, will be broken through, either through technology or by a new or an existing company over the course of the next decade or so. 

Shah: Earlier, our growth was driven by large entrepreneurs. Now there is an availability of capital for the deserving idea. This will unleash the entrepreneurial spirit. Keep the faith in long-term India’s story. So, my recommendation is ‘have faith: SIP karo, mast raho’.

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