Speaking to Bloomberg TV India’s Abha Bakaya and Priyank Lakhia, HDFC Mutual Fund’s Executive Director and Chief Investment Officer Prashant Jain says India can break away from the pack of EMs (Emerging Markets) to emerge a large and vibrant economy, and a standalone asset.
In the last few days, markets worldwide have been roiled by volatility and uncertainty. Do you expect the volatility to continue because 2016 was expected to be a better year?
Volatility in the short run is the basic nature of equities. The economy and markets are in a very healthy transition – from high inflation and high interest rates towards low; from sharp depreciation of the rupee towards stablility; from high twin deficits to moderate figures. Interestingly, FDI inflows are now bigger than our CAD, which points to a fundamental improvement on the external side. The economy is also transitioning to more capital expenditure-driven growth compared to mainly consumption-driven growth over the last several years.
The markets are also in transition. Transition means that you give up something which has worked for last cycle – in this case FMCG, pharmaceuticals, etc and adopt something new. This will take time as there is reluct-ance to adopt something new, to give up what has worked in the past. This can cause some pain in the short to medium term.
Despite this, I am positive about the economy and markets. It has been observed in the past that whenever Indian markets have corrected around reasona-ble valuations driven by external factors, they have proved opportunities in disguise.
