S Naren, chief investment officer, ICICI Prudential Mutual Fund (Photo: Mint)
S Naren, chief investment officer, ICICI Prudential Mutual Fund (Photo: Mint)

S Naren of ICICI Pru Mutual Fund on US-Iran tension, asset allocation

  • The small cap segment is set to dominate the landscape for the next three to five years, after under-performing for two years, S Naren said
  • The large caps are extremely over-valued at present making them a no-go area, despite the vital roles that the companies are playing, S Naren said

MUMBAI, ICICI PRU MUTUAL FUND : The US-Iran standoff can pull down Indian equities and small caps are expected to be dominant investment themes in the markets, ICICI Prudential Mutual Fund said on Monday. The extent to which geo-political tension in the Middle East can hurt the domestic markets, however, cannot be predicted, the second largest asset manager's chief investment officer S Naren told reporters in Mumbai.

The small cap segment is set to dominate the landscape for the next three to five years, after under-performing for two years, he added.

The large caps are extremely over-valued at present making them a no-go area, despite the vital roles that the companies are playing, he said.

Naren said the house is maintaining its call on investments in the asset allocation, wherein schemes shift between debt and equity for the second consecutive year due to difficulties on the overall front.

"We are in a moderate returns world till the (corporate) deleveraging is over and hence, we have created products like this," he said, speaking on the asset allocation product launched few years ago.

Debt schemes have given good returns in the recent years if one were to consider the tax benefits and the security because of low volatilities, Naren said.

On concerns over debt schemes, where a few bets for the AMCs have gone awry, the company's managing director Nimesh Shah claimed that the company has not had any delayed repayment on its loans under the debt schemes for the last 21 years.

Naren said small caps are definitely a risk but advised investors to play the same to get handsome returns by staying invested for three to five years. In times of low credit growth, it is essential for investors to take such bets, he added.

India is a stable economy with risk parameters like current account deficit, low credit growth and inflation being in the green, while the troubles are largely stemming from lacklustre uptick in factory output, which makes debt a profitable asset class, he said.

On the standoff in the Gulf region, he said nothing can be predicted for sure and all depends on the extent Iran reacts.

Last year's drone attacks on Saudi Arabian oil assets was presumed to be the trigger for a rally in crude but the same subsided in a week, he said.

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