ETMarkets Smart Talk: Stay invested! The market can play like Shane Warne on a good day: Arun Chulani
0 7 mins 3 weeks

“As mentioned, my personal preference is to focus on the long game and structural story and avoid timing the market,” says Arun Chulani, Co-Founder, First Water Capital Fund.

In an interview with ETMarkets, Chulani said: “The market can play like Shane Warne on a good day,” Edited excerpts:

Sensex and Nifty breached Budget Day closing last week. Where are markets headed in March 2023 which is also the last month for FY23?
I think one needs to keep a long-term perspective when it comes to investing. The market has seen many who have been bowled out clean trying to second guess near-term events and trends.

India has many great tailwinds from digitization to the infra theme to taking advantage of supply chain diversification from China.

While there may be volatility in this journey, the long-term themes appear to be intact.

With geopolitical tensions increasing – could this lead to another selloff in equity markets and a rise in Gold? How should long-term investors approach this – good time to build the portfolio?
Personally, I don’t know what event could or could not spook the market. The market can play like Shane Warne on a good day.In the near term, bad news could rattle the market or sometimes it can be absorbed.

As mentioned, my personal preference is to focus on the long game and structural story and avoid timing the market.

In order to counter volatility and the bull and bear cycles, my own preference would be to average into the market.

You may be on the receiving end of a few bad bounces, but overall, it should never get away from you, for if it falls and you are ready with your next trench, you are averaging both your loss and your time in the market.

What is your view on the proposal of extending market hours for the equity segment? What according to you is good, bad and ugly if the proposal is implemented?
While there may be merit in overlapping with other geographical regions and market-driven events, it may result in overtrading, piling of additional operational costs as the working day lengthens, and be gruelling for those who take an active role in the trades on a daily basis.

As the market retested Budget lows – what are the near-term headwinds which the equity market has to battle in the near term?
There are multiple headwinds. Of course, there is the fallout from the Adani situation, which has not reflected well on India Inc.

As China continues to open up, some FPIs may choose to tactically reallocate their emerging market exposure to them as well. We have yet to see any light from the conflict in Eastern Europe and its knock-on effect on energy and commodity prices.

The Fed versus inflation debate continues, as does its impact on growth and employment. Optically, some may feel India is valued relatively higher than other emerging markets by looking at the PE for the Nifty 50.

But in the latter case, I still believe that for the stock picker, there are well-valued opportunities out there if one is willing to dig deeper.

While there are many headwinds to be cautious about, in the long term, in my opinion, the India structural story is still intact.

Plus, any reversal of some of these headwinds may allow the market to come back onto the front foot and knock it to the boundary.

RBI could do another round of rate hikes before a pause. What are you suggesting to your clients in a rising interest rate scenario?
While we are generally sanguine, there is always an impact on finance costs as well as providing investors with a decently yielding alternative.

However, India Inc is used to higher rates and inflation, and I would suggest that we are well positioned to cope in this environment. In any case, zero interest rates were more of a developed and Western world phenomenon.

What is making FIIs nervous about India? Are they booking profits or the smart money is moving towards fixed-income instruments?

As mentioned, there are multiple near-term headwinds and thought processes that may cause an FII to redirect its capital.

However, I believe that the India story is still structurally intact, and for myself, I would look to continue averaging in, even if I were to feel some pain in the near term.

There is a saying that ‘Don’t lose sleep over near-term volatility if you are a long-term investor’. But the current volatility almost resulted in a double-digit fall in portfolio value for some investors. How should one navigate the markets?
While it is easy for human emotions to get affected by near-term volatility. But as long as there is no change to the structural story and intrinsic value of one’s investment, this near-term loss should be seen as temporary and the focus should be on building one’s ownership in companies that are likely to be a part of India’s wealth creation.

What would you suggest to investors if they want to diversify their portfolio towards global markets amid the recession, inflation, and currency risk concerns?
Even while it is my belief that there will be enough opportunities within India itself, it may be prudent to geographically diversify. If the last few years have taught us anything – anything can happen.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Economic Times)

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