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Principal Times ‘Domestic inflows could easily set off FII outflows in a few years’

‘Domestic inflows could easily set off FII outflows in a few years’

Dhimant Shah, Senior Fund Manager – Equity, Principal Mutual Fund shares his outlook for equity markets for 2017.
Jun 1, 2017

Principal Emerging Bluechip Fund invests in mid and small cap companies. Are you finding any opportunities to invest given the valuations are high?

As we go higher on the valuation curve the opportunities could be fewer but then the beauty of Indian markets is that there are always opportunities.

Principal Emerging Bluechip Fund was launched when the Sensex was at 9000 levels. How difficult was it to get people to invest in this fund during the NFO?

While this was launched during my predecessor’s time, it has been empirically observed that the effort required to collect money in NFOs is inversely proportional to market levels - lower the market levels higher the effort and higher the market levels, lower the effort required.

Do you think launching the fund during crash helped in terms of performance?

With benefit of hindsight, it probably did help. But the markets have been favourable in the last few years too.

What have been the notable mistakes in your career as a fund manager and what did you learn from them?

There are many mistakes and the most notable one would be the inability to act quickly and get in where there is an opportunity and the other is to sell at appropriate value once your targets are met. Over the years, we have tried to refine and fine tune inhibitions on both sides to be more objective and less subjective.  

Coming to some industry trends, the industry is getting good inflows through SIPs. Do you think SIP inflows over time could act as a cushion to the markets when there are huge FII outflows?

The allocation by domestic households in terms of exposure to equity in the overall savings would be less than 3-4%. This in my opinion can only see an upward growth and given the current demographics and household savings, the domestic inflows could easily set off FII outflows in a few years. To some extent, this is already visible in the last few years.

What is your outlook for equity markets for 2017?

The outlook is getting brighter and better for domestic companies owning to near completion for the transitory phase of recovery in earnings, lower interest rate, better environment for investments and reasonably good monsoons. The picture though is slightly murkier if one takes into account global scenario, especially the precarious debt situation in Europe and China. Given the IMF’s forecast of double digit growth for emerging markets vis-à-vis developed markets, this would further put India in the limelight as our economy is expected to be amongst the fastest growing economies in the world.

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