'2023 will perhaps be a year where some growth challenges come to the fore'

Roshi Jain, who is at the helm of managing a few of the prominent schemes at HDFC AMC, shares her tenets of managing the schemes. Jain, who is a Senior Fund Manager at the fund house, says that Indian markets are trading at a premium to global markets and investors should brace for volatility.

About six months back, you mentioned that rising rates, elevated commodity prices, and geopolitics were some of the key risks to markets in the near term. Since then, how has your perception evolved with regard to the risks to Indian equities? 

At the beginning of CY22, already-snarled supply chains in the post-pandemic world were further strained owing to the geopolitical fallout of the Russia–Ukraine conflict. This resulted in a spike in prices of energy and agri commodities in the first half of CY2022. Inflation surged across geographies, driving interest rates higher and culminating in monetary tightening. The transmission of rate hikes through the economy and the tightening of liquidity will impact economic activity in different sectors to different degrees and with differing time lags. Pent-up demand postCOVID reopening has also in large measure been catered to in 2022, which means that 2023 will have neither the benefit of pent-up demand nor benign financial conditions. Hence, 2023 will perhaps be a year where some growth challenges come to the fore. Rising interest rates are likely to increase the opportunity cost (discounting rate) for equity markets. In the context of Indian markets, trading at a premium on near-term earnings compared to their long-term averages and also trading at a significant premium to global markets, we should brace ourselves for volatility.

China, which has been the engine of growth for the world in this century, has seen its growth slow down for the first time since the mid-1970s bar the COVIDhit 2020. What impact do you think it will have on the Indian economy?