‘FPI inflows affected by currency depreciation and low returns’: Satish Ramanathan

Conflict-Driven Economic Risks in Global Markets

Satish Ramanathan, CIO-equity, JM Financial Mutual Fund shares his insights on the current market situation, emphasizing its fluid nature due to the ongoing war in West Asia.

Impact of the Conflict

Ramanathan breaks down the potential impact of the conflict into three levels:

• Immediate Impact: The availability of fuel is currently being affected, leading to uncertainty in the markets.
• Secondary Impact: Shopkeepers and vendors are facing challenges in producing and selling their products due to the conflict.
• Third Level Impact: Businesses may struggle to repay loans due to a rapid decline in revenues, impacting consumption baskets.

Avoiding Economic Risks

To mitigate the economic risks, Ramanathan emphasizes the need to resolve energy-related issues at a reasonable price, providing future visibility to the markets.

Market Volatility and Valuations

Despite Indian market valuations being higher relative to other emerging markets, Ramanathan believes they have decreased in the last year, making it an attractive time for domestic and foreign investors to invest.

FPIs have been impacted by post-tax returns, which have seen a hit due to the depreciation of the Indian rupee in the past year, adding to their mark-to-market losses.

Portfolio Allocation and Growth Style

Ramanathan's portfolios typically consist of an 80:20 mix of strategic and tactical allocation, with a focus on growth-style investments.

He believes India may continue to remain a growth market in the future due to under-penetration in many aspects of the economy.

Active Management and Passive Funds

At a time when most active equity funds are struggling to beat their benchmarks, Ramanathan asserts that there is still scope for these funds to generate attractive returns.

To achieve such returns, a long-term horizon is necessary, giving time for a differentiated portfolio to play out.

Ramanathan does not see passive funds as a competition and highlights their unique nuances, which add to the diversity of options available to investors.