THE CRYSTAL GAZERS

INDIA'S EQUITY MARKETS ARE ON A ROLL DESPITE A SLUGGISH ECONOMY, LEAVING INVESTORS PERPLEXED. FORTUNE' INDIA SPOKE TO SOME OF THE BEST INVESTMENT BRAINS IN THE BUSINESS FOR THEIR OUTLOOK ON INDIA'S GROWTH STORY THE POTENTIAL UPSIDE IN THE FINANCIAL MARKETS, THEIR PREFERRED ASSET ALLOCATION, AND OVERALL INVESTMENT STRATEGY.

- Neha Bothra

‘HNIs COMING BACK TO LARGE-CAPS FROM ALTERNATIVE ASSETS’

Investors should allocate 70% of equity to large-caps, says Mirae CEO.

SWARUP MOHANTY, CEO of Mirae Asset Global Investments India, says in an interview that his investment thesis doesn’t differ based on market capitalization. And while at a broader index level “mid-cap valuations have moved from a premium of 35% to large-caps” to a discount of approximately 15%, as an investor “one should have a combination of large-caps as a core portion” and the rest towards mid-caps.

He expects low-interest rates, government spending, and monsoon led the recovery in the rural economy to support a gradual upturn in the demand environment in 2020. The fund house believes corporate banks will drive earnings growth in the near term and sees a mean reversion in the stocks that are currently trading at a significant discount to their fair value. Edited excerpts:

ON THE ECONOMY

In the last few months, the government has announced several steps to arrest the slowdown. This, coupled with the Reserve Bank of India (RBI) lowering rates by 135 bps [basis points] in 2019 and a monsoon led the recovery in the rural economy, should help arrest the slowdown. While we cannot pinpoint the exact time for the growth cycle to restart, we expect a gradual recovery in demand in 2020 [calendar year] driven by low-interest rates, government spending, and rural recovery.

Corporate earnings are a function of the underlying economic performance. In the near term, earnings growth is expected to be driven by corporate banks as their credit cost normalizes. Over the medium- to longer-term, as and when the economy picks up and also due to the base effect, we should see earnings growth for the broader markets improving.

ON MARKETS