While we are in the midst of a cyclical slowdown, the bigger driver for our market’s correction is FII behaviour which is strongly influenced by currency moves. Our market correction started when the dollar(DXY) started moving up from 100 to 108.
INR has depreciated against USD to the same level as Chinese Yuan (CNY) even as our inflation was in the 4-5% range vs 1% in China. We have become less competitive to this extent and have no buffers in the event of a CNY devaluation.
If China decides to depreciate CNY against USD to counter Trump’s tariff threats, INR will need to fall likewise or steeper. These concerns are likely to keep FIIs away from our markets until things settle down. Quick resolution of the China-US trade tensions will likely be positive for our markets as currency worries will fade.
At the margin, Manish is increasing exposure to IT services, exporters and large caps and reducing exposure to industrials and consumer staples.
His dark horse picks for 2025 include lower quality lenders (bounce potential from sharp falls) and metals.
Bandhan MF’s equity funds performance in 2024 include top decile and top quartile performances in small and mid cap funds, healthy performance in large cap, large & midcap and focused funds and somewhat disappointing performance in multi and flexicap funds.
Manish says a key contributor to relative underperformance in multi and flexicap funds was understandable caution of fund managers in jumping onto high PE outperforming stocks.