Rally has not been as narrow as it appears to be, says Taher Badshah of Invesco MF

Mutual fund investors are confused about the stock market. Many of them can’t make sense of the uptrend in the stock market while the economy is yet to show sure signs of revival as the pandemic rages on.
Shivani Bazaz of
ETMutualFunds.com reached out
Taher Badshah,
Director and CIO (Equities), ‎Invesco Mutual Fund, to find out what is his view on the market. “In times such as these, the importance of financial planning and financializing savings cannot be over-emphasized. Interest rates in India appear to have turned decisively lower and prudent investments that help generate long-term wealth need to be accorded top priority,” says Badshah. Edited interview.

You have been dealing with Indian equities for more than two decades. You might remember such bleak scenarios from the past. What is different this time?
Conditions surrounding and leading up to a market crisis tend to be different on different occasions, but what typically doesn’t change is the investor psyche. That has been no different this time around too, when one thinks of the initial panic reaction and the subsequent ferocious comeback. What makes things different this time in my experience is that the present situation has not resulted out of economic imbalances but is an outcome of an unprecedented health crisis and may hence evolve very differently. Besides, what also makes this unique is the subsequent pace of market recovery, which has been the fastest ever witnessed after any significant global crisis.

The prospects of the Indian economy have been bleak even before the pandemic. That is also one of the reasons why many investors are not very enthusiastic about their equity investments. Do you think the pandemic will have a long-lasting impact on the economy? When do you expect a meaningful revival?
The SIP flow for the month of June is a mere 2.5% lower than May and may not be indicative of any trend as yet. We think with interest rates in India at their lowest ever, the process of financialization of savings will only accelerate post the COVID crisis and in that regard, this may be a brief blip in an otherwise secular trend.

Some investors may be facing financial issues because of possible job threats, pay cuts, etc because of ongoing lockdown. What is your advice to them?

In times such as these, the importance of financial planning and financializing savings cannot be over-emphasized. Interest rates in India appear to have turned decisively lower and prudent investments that help generate long-term wealth need to be accorded top priority. One may begin small, but it is important to commence one’s investment journey. Thinking about and executing upon a well-balanced asset allocation plan could be a good starting point of this journey.

Several equity schemes from Invesco stables such as Invesco India Contra, Invesco India Mid Cap, Invesco India Financial Services, Invesco India Infrastructure, etc. are among the top performers in their respective categories. How do you manage them in these times of narrow-based rallies?
The rally has not been as narrow as it probably appears to be. In the run-up post the sharp correction in March 2020, mid/small cap indices have done equally well if not better than frontline large cap indices. Having said, each of our strategies are managed true to mandate and based on a well-defined investment process. Market conditions do not influence portfolio decisions as does adhering to the mandate and stock selection based on our investment process. This allows for more consistent outcomes over long periods and is visible in the performance of our principal strategies.

Have you taken any special steps to navigate these trying times?
Generally, we have kept to the long-term investment argument of most of our investee companies. Having said that, given the unprecedented nature of this crisis, we have had to raise our risk tolerance in certain sectors of the market particularly with respect to franchise/balance-sheet risks. Overall, we have treated this period of massive decline and subsequent sharp recovery opportunistically to buy value where available and also to take money off the table in cases where value has played out well ahead of our expectations. While initially we did favor sectors with more upfront earnings resilience, over time we have tried to find value even in those where the near-term growth visibility may appear impaired. We have approached the market with a very open mind, taking broad-based bets across sectors and market cap.

What is your advice to equity mutual fund investors who are unhappy with the performance of equity mutual fund schemes in the last few years.

It is important for investors and advisors alike, to periodically evaluate their investments from the point of view whether the fund has adhered to its mandate and the performance is commensurate with the risks it has undertaken for the same. In cases, where the underlying investment approach is unclear and has been deviant from the mandate over long periods of time, it would call for a thorough reassessment.





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