The fall in the stock markets is a great opportunity for long-term investors to start investing. This is to say of S Naren, Chief Investment Officer, ICICI Prudential Asset Management Company. He said that Russia’s attack on Ukraine has revealed a new kind of geopolitical crisis. Due to this, it is difficult to tell how the situation will be in the stock markets in the near future. Moneycontrol had a lengthy conversation with Naren about the current state of the market and its future. Here are the highlights of the interview.
Investors are disappointed as the stock market has fallen 15 per cent from its top, what would you like to tell them?
Things have changed in the last few months. Foreign investors were selling during the last four months. Local investors were buying. Retail investors were very excited. The IPO being oversubscribed is proof of this. Between April 2020 and November 2021, investors started believing that there was no risk in the stocks. There were some issues with respect to valuations and investor enthusiasm. This is the reason we recommend asset allocation and debt funds.
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It is the right time to invest in geopolitical tension stocks, is this time a little different?
You are right that this time is a little different. I was telling my friends that after spending 18 years at ICICI Prudential by chance I can say that I had never seen war. Now I see and it’s very disappointing. The truth is that the situation is very complex. It’s very difficult to say anything for Near Future. Yes, Ukraine Crisis Solved is a must for market returns. Therefore, in the near term, the market outlook is entirely dependent on the Ukraine issue. If this problem escalates further, further downside in the market cannot be ruled out. If the problem is resolved, the market may see a sharp rally.
Over the years, we have taken the lesson that asset allocation is essential during such difficult times. For long term investors, this market correction is a great opportunity to invest systematically over the next 12 to 18 months. This is because we have confidence in India’s growth story over the long term. We would advise investors to continue with systematic investments in both equity and debt funds with asset allocation.
Inflation has not been a big concern for RBI so far, but it seems to be a big concern with the rise in crude, what would you like to say?
Big jump in oil prices is negative for India. We have seen that in 2011-13, due to increase in oil prices, oil subsidy increased. Due to this the current account deficit had increased and the rupee weakened. Inflation also increased. Rising commodity prices are a challenge for the RBI and the Indian economy.
If you are the Chief of RBI then today there is a big challenge for you. If the prices of sunflower oil, aluminum and steel rise, then it will be difficult to say that the rise in inflation is short-term.
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