Economic, social reforms key levers for India to sustain premium over peers, says Tata AMC’s Kunal Pawaskar

Economic reforms that could drive up the per capita income, social development parameters, and resilience in trade relationships will be essential to sustain this premium, believes
Kunal Pawaskar of Tata Asset Management Pvt Ltd.

“These are essential over the medium-term for a healthy economy. Market health will ultimately be dependent on this,” the principal officer and head – portfolio management services at the mutual fund house, told
ETMarkets in an interview.

Since the pandemic, markets across the globe and asset classes have seen a phase of excess liquidity injection followed by the withdrawal of the same.

In such a situation, it is imperative to understand and analyse these developments given their outsized impact, before deploying money, said Pawaskar. Below are the edited excerpts of the interview:

As a fund manager, what has been your investment philosophy?
I value flexibility in being able to participate in a range of business situations, stable growth to turnarounds at different ends of the spectrum, and building exposure across styles.

Markets go through regime changes at certain points and shifts can persist for even a decade or more. There is risk in not evolving with the changing environment and there is merit in leaning on a trend that may be durable.

Do you think the fast-changing global environment which is filled with uncertainties and the regulatory landscape affect investment decisions significantly?

The past couple of years have shown us what the injection of liquidity and its withdrawal by central banks can do. It is imperative to understand these developments well because they are indeed having an outsized impact on the stock market, in India and abroad. The influence of macro on equities in India and abroad has kept increasing post the global financial crisis. In the last two years, it has had even more impact than before as central bank actions have kept getting amplified.

In the current market volatility, how have you managed to maximise returns and minimise losses for your clients?

We have focused on having businesses in the portfolio that have potential over the medium term. We prefer not to chase short-term trends. We have been careful with the cash portion of the portfolio. Unless we like the risk-rewards, we will not rush to deploy into equities.

What are the other metrics apart from financials that you gauge before investing in a stock?

Most investors, including myself, would have learned the ropes by studying equities on a purely fundamental basis.

As we clock year after year in the markets, all investors start framing their own ways of approaching the market, and those also keep evolving.

It has been a process of discovery over the years for me, as I have realised that strong trends that drive sectors upwards or downwards, when traced backwards, at times can lead us to moving macro variables. I incorporate them in analysis because they are useful guides to understanding market environments and turning points in cycles.

What is your opinion about new-age technology companies? Their financial and operational metrics are not conventional, so how is your approach towards them?

We have generally stayed away from most of these companies in the last year. Loose liquidity regimes helped drive excesses in this area in the past few years.

It is also true that valuations have been correcting, severely even in many examples in the public and private markets.

Technology has an increasing role in the lives of individuals and industries, but investments may not be rewarding even if business growth is healthy. Especially, when we are exiting a recent easy-money environment, this is more relevant.

We continue to study these in the interim, and will not be averse to considering them if the risk-reward becomes favourable.

India remains a premium market when compared to its peers. What are the levers that will help India sustain this premium?

Economic reforms that take our per capita income higher. Secondly, the social development parameters need to rise in parallel to avoid imbalances.

Thirdly, resilience in trade relationships, energy security, and capital flows in a world that is getting more fragmented. These are essential over the medium-term for a healthy economy. Market health will ultimately be dependent on this.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)