Where do you see markets by FY24? 

In the last two years, fund flows supported a broad-based rally in Indian markets. Most sectors and stocks participated in this rally supported by a low interest rate scenario. Quality growth companies traded at a premium to high beta names, however, this premium reduced during the last two years due to broader participation. As global liquidity tightens, flows moderate and global economic growth comes under pressure, performance will become more skewed towards quality companies with better balance sheets and growth prospects. We believe that in FY24 growth will make a comeback versus value.

Sundaram Alternates expect certain sectors like financial services, consumer discretionary and technology companies to outperform compared to defensives and global commodities. We also expect that specific manufacturing sectors like specialty chemicals would benefit from China +1 and Europe +1 and can deliver strong outperformance over the next two years. 

In industrials, very high expectations and valuations can lead to meaningful underperformance during 2023 as global growth slows down. Demand for adding new capacities is expected to get postponed globally in 2023, except for a few sectors. 

How is India positioned in the global markets over the next 5 years? How bullish are you? 

India ranks 5th globally in the world market cap vs 10th from a decade ago, behind USA, China, Japan, and Hong Kong. I strongly believe that India will become the world’s 3rd largest stock market by 2027, and there are various factors in play that will boost India to achieve this feat.

Conducive government capital spending towards infrastructure, healthcare, financials along successful implementation of Aatmanirbhar Bharat, Production Linked Incentive (PLI) schemes, and the National Infrastructure pipeline will start manifesting as growth over the coming years.  

The China +1 and Europe +1 theme promoting a Make in India stance, has given India an opportunity to shine as a manufacturing hub for the world for years to come.  

Inflation in India has also been under control despite global cues and is likely to remain within a comfortable range along with interest rates which are expected to turn supportive in the future.  

Rapid developments in technology are helping businesses scale up at a faster pace with 50% to 55% of e-commerce business coming from Tier II and Tier III cities, resulting in organized businesses seeing higher levels of penetration and growth.  

As credit growth, capacity utilization and private investments pick up, this will spur consumption and demand, and a higher GDP growth in the coming years, leading to a revival in the capex cycle.  

What are the 3 major Headwinds & Tailwinds for the global economy & markets currently? 

The global economy is currently undergoing an uncertain situation, being confronted by a unique mix of headwinds, including interest rate increases to contain inflation, Russia’s invasion of Ukraine, Europe’s energy crisis, disruptions in supply chain and lingering pandemic effects such as China’s lockdown.

Supply side constraints led to spike in commodity prices and elevated shipping costs, thereby hurting the cost of doing business and ease of global trade. As the global economy recovered from Covid’s impact, the Russia – Ukraine war has been debilitating to the recovery. Energy cost spiked leading to a resurgence of inflation and supply side constraints. China slowdown due to zero lockdown policy, gave a helping hand in controlling a part of the inflation pain, led by falling basic commodity prices across industries. As we come to the end of 2022, inflation concerns seem to have clearly peaked out, but are still far away from comfortable levels. 

On the positive side, India probably will be among the least impacted by these global headwinds supported by strong domestic consumption trends. Robust urban job markets, few timely regulatory and political measures have helped India to control inflation trends and navigate global macro pressures smoothly. Major drivers for additional allocations were uncertain economic conditions in China due to lockdowns, a marked slowdown in Europe due to the energy crisis & war, and rising interest rates & weak demand hurting the US. This has protected major indices from a fall despite an earnings cut in 2022.  

How are you managing your own investments in current times of recession, inflation, war, and at ATH domestic indices? 

I believe in keeping my investment strategies very simple. Indian equities have remained buoyant despite the global interest rate hikes, Europe’s energy crisis, Russia’s invasion of Ukraine and supply chain issues, and have been outliers even compared to emerging market peers, thus fortifying my belief in India now and for many years to come.

I remain invested in Indian equities through managed portfolios and believe in India’s potential to become a USD 10 trillion economy with the prevalent conducive economic policies along with the government’s stance on infrastructure and development spends in the country. My portfolio also has a fair allocation to debt and gold as well. 

What are your immediate, 1Y and 5Y plans and vision as Managing Director at Sundaram Alternates? 

Sundaram Alternates is currently an ~INR 4,500 crore company, with PMS strategies across small and mid, and multi-caps, Alternative Funds spanning real estate, structured credit, and long-only equity strategies, and Advisory Services.

Today, we serve over 3500 clients, and our medium-term goal is to transform the company into a high quality, digitally enhanced investment management franchise. Our recent launch of digital onboarding for our PMS strategies, currently live for resident individuals, is a step in this direction. We are slowly, but steadily making enhancements to systems and processes to improve the experience of our partners and investors. 

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Disclaimer: Securities investments are subject to market risks and there is no assurance or guarantee that the objective of the investments will be achieved. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements

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