This deadly cocktail could be beneficial for India

Something deadly that could be beneficial for you? Seems like an oxymoron, right? Well, not quite.

The narrative in global financial markets is currently moving between hyper-inflation, a slowdown in growth and high interest rates. This has resulted in investors, especially in equities, turning risk-averse.

India, in fact, has seen outflows of $28 bln from foreign institutional investors since the start of 2022*. More than two-thirds of emerging market funds are also currently underweight on India, said Pankaj Tibrewal, fund manager for equities at Kotak Mahindra Mutual Fund.

These headwinds, though, are likely to be transient, and India has something that can help it over the long run.

A cocktail of three factors.

“…100 crore bank accounts, 100 crore Aadhars and 100 crore mobile connections are a deadly cocktail,” Tibrewal said.

A combination of these three factors will significantly speed up the time taken to implement reforms, he said. This is a structural change that India has seen post COVID.

Apart from this, what could be beneficial for India are the opportunities arising from supply chain disruptions, and the rising costs of energy for Eastern Europe.

Global companies are exploring value chains in the manufacturing sector and would look at switch to countries like India. “We have already started to see supply chain diversions in favor of Indian manufacturers,” Tibrewal said.

He said that investors must continue to remain disciplined in their asset allocation, and try to spend time in the market rather than timing the market.

Disclaimers:

*Source: NSDL. Data as of 28th June 2022

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This article is for information purposes only. The information provided herein is derived from public sources, believed to be from reliable sources. However, no representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. Views expressed herein involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied herein. Kotak Mahindra Mutual Fund/ Kotak AMC is not indicating or guaranteeing returns on any investments. Past performance may or may not be sustained in future. Readers should seek professional advice before taking any investment-related decisions and alone shall be responsible for any decision taken.