Dalal Street Voice: Add international themes to benefit from currency diversification: Rahul Bhuskute of Bh… – Zee Business

Rahul Bhuskute, CIO, Bharti AXA Life Insurance said that it might be better to sit on some cash and invest at higher yields amid current volatility. It might not be a bad idea to add some international investment themes to provide currency diversification to the portfolios.

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Rahul is a tenured investment professional with over two decades of diverse and extensive experience across organizations such as ART Special Situations and ICICI Group.

In an interview with Zeebiz’s Kshitij Anand, Bhuskute said that in the medium term, the investors long term asset allocation plan should be the guiding star for all their investments. Edited excerpts:

Q) What does the BJP win in the 4 states mean for markets, economy and reforms?

A) Markets like stability and certainty as well as consistency of policymaking. They also like a growth-oriented regime that is strong on execution and delivery.

So far as the outcome of the recent elections helps reinforce these factors, it would help markets. In terms of the wider economy and reforms, these election wins should provide the ruling party at the Centre and its leadership conviction to be able to undertake longer term reforms.

Then it’s up to the vision of the government and its ability to implement. The wins in these states, especially UP, also help set the tone for the forthcoming national elections.

Q) The war-like scenario must have wiped out a good 5-10% of investor portfolio in a matter of weeks. What advice would you like to give to investors. Should one stay put, add on dips or cash out – what does the history suggest?

A) It does present a good opportunity to buy but only to those investors actively managing their portfolios, who track market and stock movements regularly.

For most investors though, short-term volatility should not deter them from their wider, longer-term asset allocation plans.

The Indian markets had become expensive and were moderating even before the recent geopolitical episode – to that extent, it has just precipitated expected corrections in a shorter time frame.

The current geopolitical climate and its repercussions on markets and prices – such as those of oil and commodities – and wider supply chains are still to unfold and be understood fully.

Therefore, investors should not rush to either invest or take out money from the markets. It’s better to focus on the longer-term portfolio building as per one’s own investment objectives.

Q) If someone plans to put in Rs 10L after the recent double-digit fall seen in benchmark indices from 52-week highs. What is the right asset allocation strategy considering someone is in the age bracket of 30-45 years of age? Also, should one do lump sum or STP?

A) The asset allocation strategy for each individual will be different, depending on their risk-taking ability and their financial goals. It is hence difficult to suggest an asset allocation for someone without knowing about their circumstances.

Though the equity markets have corrected meaningfully, we would not recommend investing lump sum right away, given continued global uncertainties and heightened volatility.

It is always preferable to follow the SIP/STP route to build long-term wealth, averaging across market cycles.
 
Q) With interest rates likely to head North – what is the right strategy for MF investors? Should they look at tweaking their asset allocation?

A) In the short term, given the negative real rates in the country, and the increasing crude price and inflation worries, investors should be cautious about undertaking large additions to their fixed income portfolios.

It might be better to sit on some cash and invest at higher yields. Also, it might not be a bad idea to add some international investment themes to provide currency diversification to the portfolios.

In the medium term, the investors’ long-term asset allocation plan should be the guiding star for all their investments.
 
Q) Retail investors reaffirmed their faith in equities amid volatility (geopolitical towards later part of the month) as equity funds saw a net increase of more than Rs 19000 cr in Feb. What are your views and do you think this war like scenario could result in a slowdown in the flows?

A) Investors have seen the benefit of investing in equities to consistently grow their wealth. The past decade has seen the equity index deliver a CAGR of 12%, despite several disruptions like demonetization, twin deficits from rising crude oil prices, GST implementation, geopolitical unrests, etc.

Investors today are convinced about the potential of equities and the importance of investing systematically.

Hence, we see continued interest in the markets through the systematic investment route and therefore sustained equity flows into the market.

Q) Crude above $100 – what is the kind of impact you foresee on markets, economy and India Inc. in upcoming quarters?

A) India is a net importer of crude oil for its economy, and we import about 85% of our requirements every year. Hence an increase in the price of crude oil has a direct impact on our trade deficit.

It is estimated that a $10/barrel increase in crude oil impacts our deficit by 40 bps (0.40%). While our strong FDI and inward remittance flows help us cover a significant part of oil outgoes, a heightened crude price does pose a new challenge to the Indian economy and policymakers.

A current account deficit beyond 3% would start raising some concerns. If the crude price rise is short-term, the Indian economy should be able to withstand pressures. However, a protracted high price cycle will need to be monitored.

Also, a sustained high price of crude has the potential to impact margins for several industries which rely on crude and crude derivatives as raw materials and could affect sentiment around these sectors.
 
Q) Gold recently became buyers’ favourite – what should be your strategy in case someone plans to put fresh money in the yellow metal? Should they buy physical Gold or digital and why?

A) Investors can earmark some part of their allocation towards gold, especially given the context of rising inflation (though even equity returns have also traditionally beaten inflation).

Holding gold via ETFs is a good way to participate in the returns that gold can generate, as ETFs are liquid, easy to transact in, and cost-effective.
 
Q) What is your take on the rupee? Which sectors could get impacted the most from recent volatility?

A) As mentioned above, the rupee should be able to withstand short-term pressures given the strong forex reserves with the central bank. However, a protracted high crude price cycle would lead to worries around inflation and the current account deficit.

Given the negative interest rates in the country, this could lead to more pressure on rupees and rates in the medium term.

Q) Are there any sectors that you think have run out of steam and investors should ideally look at booking profits or trimming their positions?

A) Post the recent correction in the markets, we believe there is value in several sectors, in particular the domestic cyclical sectors like financials and industrials. We also feel that conditions are conducive for an end-user-driven real estate cycle.

Having said that, we focus more on bottom-up stock ideas irrespective of the sector as we believe there are company-specific factors that make a stock attractive despite being part of an industry that may be considered expensive or is temporarily out of favour.  

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)