Navneet Munot of HDFC AMC shares key investing lessons for volatile times

Omicron, Russia-Ukraine war, Covid-related lockdowns in China, inflation concerns and rate hikes by central banks. The journey of equity markets this year has been anything but smooth. Year to date, the Nifty is down over 4%, oscillating in a range of 18,350 to 15,671.

“It’s noteworthy how last couple of years have been a baptism by fire for investors, as sharp gyrations in financial markets and numerous unforeseen events have kept investors on toes. Considering rapidly evolving geo-political landscape, change in course of globalisation; and with Central Banks retreating into their role of reining in inflationary expectations instead of doing ‘whatever it takes’ to support asset markets, volatility is likely to remain elevated,” said Navneet Munot, Managing Director and Chief Executive Officer at HDFC Asset Management Company Limited, in an article. 

“Investors’ equanimity and patience will continue to be tested in the foreseeable future but don’t we know from history that the formula for wealth creation equates sound investment + time + patience.”

For Indian equities, strong retail participation (63% increase in demat accounts in FY22) and robust Mutual Fund flows have cushioned the downside from recent FPI selling spree, he said. 

Continuing its heavy selling spree for the eighth consecutive month, foreign investors pulled out nearly ₹40,000 crore from the Indian equity market in May on fears of an aggressive rate hike by US Federal Reserve that dented investor sentiments.

With this, net outflow by foreign portfolio investors (FPIs) from equities reached at ₹1.69 lakh crore so far in 2022, data with depositories showed.

“Over the years, financial markets have grown used to expecting the unexpected. Almost any passage of time in the history of financial markets is replete with events which have taken market participants by surprise. However, it would be fair to say that 2020s have just taken this to an altogether different level. In a lighter vein, one could wonder how the first quarter of last few years has made it a habit of making a mockery of beginning-of-year forecasts. While 2020 was a year which began under the looming threat of geo-political tensions between US and Iran; by the end of the first quarter the thing that had turned the world upside down was, after all, a virus. At the start of 2022, while all eyes were on the spread of Omicron; by the end of the first quarter the event that actually shook everyone was a geopolitical one (Russia-Ukraine war),” Mr Munot said. 

In a world where new geo-political alliances are being formed and existing ones are being tested, he adds, sound financial plan and prudent asset allocation still continue to remain the best allies for investors to counter the formidable foe of volatility in financial markets.