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Aditya Birla Sun Life AMC Limited

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    Domestic economy structurally strong with sound fundamentals

    Transcript

    Oct 17, 2023
    5 Mins Read
    A. Balasubramanian

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    India’s resilient march continues on the back of strong domestic demand despite global macro uncertainties with a steady focus on macro stability and sustainable fundamental growth. The country’s strong structural drivers are expected to keep sentiments upbeat and the outlook for India broadly remains positive. In the October 2023 Monetary Policy, while keeping repo rates unchanged, the Reserve Bank of India Governor presented a very positive outlook on India stating that the country is poised to become a new growth engine for the world.


    Our economic conditions remain favourable with various high-frequency macro indicators including capex gaining ground and strong GST collections, PMI, better capacity utilisation, credit activity and service exports. Even though last month saw some outflows with FIIs taking a breather driven by increasing uncertainty due to higher yields in the US and a stronger dollar, cumulative inflows remain strong with India being one of the highest recipients among select emerging market economies. International investors are increasingly embracing the idea of India as a favourable alternative compared to China considering our growth visibility and lower susceptibility to geopolitical risks. This augurs well for the long-term outlook of the country and would be beneficial in keeping FII flows sustained.


    Market optimism to continue in the long term


    The inclusion of India in the JP Morgan EM Bond Index represents a significant milestone, further elevating India's global perception and signifying substantial progress for the economy, bond inflows, interest rates and the rupee's strength. Over the past five years, we've witnessed substantial improvements not only in corporate balance sheets but also in the PSU sector, particularly in critical sectors like infrastructure, power, logistics and real estate. These advancements reinforce the commitment to long-term investments, leveraging the opportunities presented by India. They say a rising tide lifts many boats and as various pockets of the economy start performing, my view is that the breadth of our markets will continue to expand. The festive season has started in full swing and on a cheerful note which is poised to drive higher consumption in India and uphold a strong positive sentiment in the market.


    Overall, I expect market optimism to continue in the long term, albeit with some interim volatility owing to extraneous factors such as global macros and geopolitical tensions. Indian markets have witnessed a broad-based recovery, with the Nifty 50 hitting the significant 20,000 mark in September this year and even other broader market indices scaling new highs. The markets have transitioned from being predominantly cyclical to a structurally sound platform. One of the key risks for India is higher energy prices which have moved up lately due to supply-side issues. The recent geopolitical tensions could further impact global oil markets, resulting in a surge in prices. Domestic markets may see some volatility in the rupee and bond yields. The domestic economy is structurally strong with sound fundamentals, hence except for interim volatility, there may not be any major impact on India as a result of the recent geopolitical conflict. The country remains on a steady footing, but we need to keep a watch on energy prices.


    Investors should focus on asset allocation


    Investors should focus on asset allocation to navigate through the ebbs and flows of the market. Irrespective of where in the market cycle we are, asset allocation is the ideal way to build a mutual fund portfolio. There are various solutions available to investors to achieve this. Based on your goals, risk appetite and investment tenure, you can consider investing in diversified equity funds along with hybrid funds, such as the balanced advantage category, which provides exposure to both equity and debt. Equity as an asset class is expected to remain range bound, with the broader market expected to remain buoyant ahead of the quarter’s results and the impending festive season sales. Debt as an asset class is a must-have, not just in terms of adding stability to one’s portfolio, but with rates expected to remain ‘higher for longer’ and no near-term visibility of rate cuts, it is prudent to have exposure in this asset class. It also reflects that fixed income investors are poised to get better carry in funds, right from Liquid funds to Medium duration funds.


    Sources –
    1. RBI Monetary Policy Report – October 2023
    2. Fitch Ratings - JP Morgan Global Bond Index-Emerging Markets (GBI-EM)


    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.



    A. Balasubramanian

    About Author

    Mr. A. Balasubramanian is the Managing Director & CEO of Aditya Birla Sun Life AMC Limited. A stalwart of the mutual fund industry, he brings with him over three decades of rich experience.

    He has been associated with the organisation since 1994. Prior to assuming the role of the CEO in 2009, Mr. Balasubramanian served as Chief Investment Officer from 2006 to 2009. As Managing Director & CEO, Mr. Balasubramanian oversees Rs. 3 lakh crore in Assets Under Management at Aditya Birla Sun Life AMC. Before joining ABSLAMC in the year 1994, he worked with GIC Mutual Fund, Can Bank Financial Services and Pandit & Co. between 1989 and 1994.

    Mr. Balasubramanian has been awarded CEO of the Year title by Asia Asset Management in 2018 and 2020. He has been awarded Chairman’s Individual Award by The Aditya Birla group for being an Outstanding Leader in 2015 and for being a Leader of Leaders in 2018.

    Mr. Balasubramanian is closely associated with key industry bodies. He has been on the board of AMFI (Association of Mutual Funds in India) since 2009 and was the Vice Chairman of AMFI in 2015-2016. He has served as the Chairman of AMFI for two terms, from 2016-2018, and reappointed for the period of 2021 – 2023. He is also the ex-officio Chairman of AMFI’s Financial Literacy Committee. Mr. Balasubramanian is also an esteemed member of the Fund Management Advisory Committee of the International Financial Services Centres Authority (IFSCA). The committee will be advising IFSCA in laying down a long-term plan for the orderly growth and development of the fund management industry in IFSC. He is also a Governor on the Board of Governors of the National Institute of Securities Markets (NISM), and member of the advisory committee of the SEBI Investor Protection and Education Fund (IPEF).

    He has completed advanced management programs from Indian Institute of Management, Bangalore and Harvard Business School. He also holds a bachelor’s degree in science (mathematics) and a master’s degree in business administration from GlobalNxt University.

    Mr. Balasubramanian is involved with philanthropic work through various charitable organisations. He is actively engaged in initiatives towards Mother & Child healthcare and supporting Indian Art & Culture. He is one of the active members at Sathya Sai Sanjeevani Centre for Child Heart Care. He is also associated with Sathya Sai University, Gulbarga that imparts knowledge on Human Excellence to students during their higher education. He promotes Indian Arts and Village Traditional Culture by being a Trustee at Melattur Bhagavata Mela Foundation.

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