‘Improved earnings will reflect in the equity markets going forward’: Yogesh Patil, CIO-Equity, LIC Mutual Fund

The Indian stock market has been volatile for quite some time. However, Yogesh Patil, CIO-Equity, LIC Mutual Fund believes that once things are settling down in the global front, money will be flow back into emerging economies. He tells Kushan Shah that the industry should be consistently telling investors about benefits of long-term investing during such times. Excerpts: How do you see the current market environment? India has underperformed in the last one year compared to other emerging markets. Globally, due to their negative correlation, equity underperforms when bond yields rise. However, this time, equity has moved in selective countries based on certain themes like AI & technology. A lot of investors with a higher risk appetite are investing in tech companies, due to which money has flown to markets like US, South Korea and China. At the same time, subdued earnings, uncertainty around the US trade deal added with flattish GDP led to underperformance in the domestic equity markets. Going forward, we think earnings of domestic companies will improve which will be reflected in the equity markets as well. How do you look at the cues from the global markets? What do you think could be their influence on the Indian markets over a short to medium term? Money always moves to countries that show higher growth potential. Once the interest rates come down and the bond prices start cooling down, money will start flowing to the emerging markets with India as one of the chief beneficiaries. The biggest challenge for global markets is controlling fiscal deficit and inflation. Once there is clarity on both, the markets will do well. India has recently finalized the trade deal with the US and a trade agreement with the EU. Which are the sectors which could see a long-term impact due to these two deals? These two developments will help Indian markets access economies with the benefits of size and scale. This can have a positive long-term impact on many sectors including auto ancillary, textiles, gems and jewellery, chemical, Emergency Medical Services (EMS) and up to some extent engineering capital goods. How do you think the mutual fund industry can manage expectations of investors who may have developed inflated expectations due to higher returns in the recent years? Investors need to understand that equity is a long-term product which can pose short-term challenges. However, majority of the investors who stay invested over a long term have benefitted with good returns. So, it is important for the industry to emphasize on the importance of a longer investment horizon. Which themes and segments are you bullish about in the present market and over a medium term? We are positive on BFSI, auto ancillaries (especially on the export side), specialty chemicals, EMS, selected defense companies, data centers and power segments.