Axis Mutual Fund: If oil stays below $100, then India will remain in good shape: Jinesh Gopani

“I think if you are looking at comparison to emerging markets, Indian market valuation is still a bit higher as compared to the other emerging markets. And hence, if you see, last 12 months we would have underperformed as a market as compared to other markets,” says Jinesh Gopani, Axis Mutual Fund.

Let me start with analysing the market moments for the month of April specifically what kind of external events do you think are weighing on the markets and what is the way ahead specifically talking about this month?
Yes, if you see this month has been pretty volatile and given the global events which are taking shape first is the banking crisis in US as well as in Europe which is leading to a lot of volatility around so what will happen if let us say the interest rates go up further from here on. The second is how the inflation in US will taper down and with that whether the interest rates halt will come after 25 basis hike or there are more hikes which are in. Plus if you really see how the crude oil prices will behave with latest OPEC cutting the production, I think again the volatility in the global market is around and it has been a feature for some time now that volatility is going to be a friend.

Also what about the equity market valuation? Are they broadly reasonably low in earnings and is there potential of revival also, what is your view there?
See, I think if you are looking at comparison to emerging markets, Indian market valuation is still a bit higher as compared to the other emerging markets. And hence, if you see, last 12 months we would have underperformed as a market as compared to other markets.

But as the time correction further gets into play and hopefully there is a revival in earnings after a quarter or so, then I think at least from our portfolio point of view we see fair valuation coming into play and as earnings growth bounce back happens, we should see improvement in terms of valuation.

Also, now since we are talking about all these triggers and cues, what are the risk factors that an investor should be aware of in the next financial year? A portfolio should obviously be made with a long-term horizon and the goals lined up with that. But then talking about just this year and the kind of triggers we are having right now, currently moving the market, what are the risk factors that an investor should actually count in and maybe have their strategy set accordingly?
I think globally, if you really see you are having three major countries or continents going slow. You have US moving into mild recession, hopefully. You have Europe, which is let us say not doing that great. And also to some extent what comes out of China is not a full-blown recovery, it is going to be a slow and steady kind of recovery.

So in that backdrop and the interest rates going up by 300 to 400 bps, I think clearly you are witnessing some kind of slowness in the economy. Whether that slowness in the global economy impacts India directly or indirectly is to be seen, whether we grow at 6% or we grow at 5.6%, I think that is the question we are asking ourselves that how a country will emerge when the global backdrop is not looking that great.

Hopefully, the domestic economy is doing well. Capex programmes are on track. General momentum in the market is good. The business environment confidence is decent, I would say. So I think all in all I would say the global rout or global volatility will decide some bit of slackness in growth in terms of the domestic market and that is where we need to be very-very careful that really how this global event shapes up.I think India on a standalone basis looks pretty good. However, oil prices are always a joker in the pack. So if oil remains below $100 then I think India is in good shape. If oil rises above $100 then clearly we will have to see how much growth impact it can have.

The second half of this year can be interesting looking at the interest rate hikes but then the second half of this particular calendar year might see a pause or maybe cutting down of rates. Do you see that on the cards?
I think we are nearing the peak of interest rates, maybe one more hike and then hopefully pause. And again, that will depend on the inflation data. It looks like the inflation is pulling off slowly, steadily and maybe three to four quarters down the line, there might be talk of cutting off interest rates in the US. So clearly yes, second half is going to be interesting which way the tide turns. Hopefully it should be for good.