'Once inflation cools off, you will see reversal in fortunes of most fundamentally strong companies'

INTERVIEW - HARSHA UPADHYAYA, President & CIO – Equity, Kotak Mahindra Asset Management

The markets around the world have turned volatile due to rising inflation. Coupled with this is the Russia-Ukraine tension. Recently, these led the RBI to raise the repo rate by 40 basis points in a surprising fashion. We speak with Harsha Upadhyaya to understand the impact of rising rates on the markets. Upadhyaya manages Kotak Flexicap Fund, the largest flexi-cap scheme that manages upwards of ₹36,000 crore in assets. He also shares with us his investment strategy for this giant fund.

The markets have turned volatile over the last few months due to rising inflation and geopolitical tensions. What's your outlook for the market in the short to medium term?

Globally, concerns on inflation, interest-rate hikes and geopolitical issues continue to persist. On the local front, earnings estimates are unlikely to go up at least for the next couple of quarters. In fact, there is a reasonable chance that earnings may disappoint. Equity valuations generally get compressed in a scenario of rising interest rates in the economy.

Given all these factors, we expect heightened volatility in the markets to continue in the immediate term.

With the RBI biting the bullet on interest rates recently, how do you see the interest-rate cycle panning out? What could be its impact on the market in general?