'We believe inflation has peaked and is likely to normalise over the second half of the year'

Amid rising inflation and interest rates, stock markets worldwide have turned volatile. We speak with Jinesh Gopani, Head Equity, Axis Mutual Fund, to understand where the markets are headed over the short to medium term.

- JINESH GOPANI

We also speak with him about the investment approach at his AMC and how he avoids wealth-destroying stocks. Gopani also gives advice to investors regarding how to deal with corporate-governance issues.

The markets have been falling over the last few months due to rising inflation and interest rates around the world. What's your short-to-medium-term outlook for the market?

We are in the midst of unprecedented times in terms of global macro - from multi-decadal inflation prints to deep recessionary fears and spiking interest rates. For risk assets like equity, a global repricing has been underway for the better part of nine months as markets factor materially higher interest rates. The resulting headwinds have been prime drivers for market volatility across the board, including India. We believe that the bulk of this has already taken place, with broad market gauges down 15-20 per cent and some highly speculative assets down up to 60 per cent.

By comparison, India has been relatively less affected across equities, fixed income and currencies on account of our economy's ability to sustain market downturns. Monetary and public policy have had a material, yet hidden, role in this resilience.

FPIs, who have historically held roughly one-fourth of the largest 200 companies in India, have been prime sellers as part of their wider reallocations away from emerging markets. This basket selling has led to a correction of excesses in the Indian market. Coupled with robust earnings, valuation metrics for Indian companies today look significantly more attractive than they did 12 months ago. Despite the weak external environment, relatively strong corporate earnings have surprised most market participants in India.