‘Index is Just a Data Point'

One of the oldest financial groups with a legacy of over 150 years, Damodar Samaldas Purbhoodas (DSP), stands strong even today. DSP group’s mutual fund (MF) arm DSP Investment Managers is one of the top-rated fund houses in the country. Its business is presided over by young and energetic Kalpen Parekh, who manages funds worth more than ₹1.15 lakh crore. Parekh shared his views on various issues related to the mutual fund industry, economy and stock markets with Yagnesh Kansara in a freewheeling interview. Excerpts from the interview:

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There is a visible disconnect between the market and the economy. Why do you think this has happened? Moreover, how the stock market is going up despite the disconnect?

Markets always look ahead, whether they are heading upwards or downwards. Generally, they look to the future over the next 2-3 years and how the economy would look like. India has always been seen as a growth market, notwithstanding the fact that in the last 10 years, the average profit growth was less than 10 per cent. However, during the last year, corporate profits have risen much faster than before. Reacting to lockdowns, a lot of companies have either redesigned their business models or taken advantage of their industry consolidation and picked up market share from fragmented smaller players.

The overall economy had significantly slowed down and has just started to revive. We could have temporary glitches because of new lockdowns, but the stronger companies have got stronger.

Second, for the stock prices to move either up or down, liquidity also plays a very important role. Today, the world over as well as in India there is a lot of liquidity in the hands of investors, that is getting invested in equity funds and stocks. So the demand for equity as an asset class has only increased over the last few years.