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Sun, 7 Oct 2018 | Mint

Earnings trend has been a bit punctured in the short run

IIFL Asset Management Co. joint CEO and chief investment officer Anup Maheshwari says the market will not take much cue from the possible rate hike. Edited excerpts:

What are your thoughts after the kind of pain that the market has seen?

This is natural; volatility is always a part of equity markets. We all walk into the asset class knowing fully well its volatile nature. Clearly quite a few factors have come together this time around within a very short period of time, which has probably accelerated a little bit of that fear. The fact is whenever liquidity is tight and interest rates are heading up, it is bound to have some negative effect on the asset class. The consequences of that is that earnings do get downgraded eventually. So, while we were just about to start off a better earnings trend, it has been a bit punctured in the short run.

These sort of corrections are always needed, good in terms of just a long-term profile of the asset class. So, in a sense, we look at corrections as eventual opportunities, where some businesses get stronger and some get curled out. You are seeing that sort of a phase where some businesses will emerge much better and some will be much weaker. There are certain portfolio changes that you need to do at a time like this in terms of conditioning it, for let us say, the next 12 months or so. So, some of the performing sectors will probably correct a little more.

This will definitely be a bit of a damper for several crores of investors who walked into mutual funds last year. How do you see it?

For us, specifically, it is a very different book of business. IIFL AMC is largely in the alternate space, where we have about a $4 billion book. Therefore, probably we are not the best indication of what is happening on retail flows. The industry numbers are out there for most people to see. The way I see it, obviously, people who have come in a year ago would be hurt a little bit. But what is important is to see this SIP flow maintain its consistency because this asset class will eventually generate the return. The issue is, do you have the patience to sit through it and allocate your money properly through it. I think that is as important as just investing itself.

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