‘We are opportunistically increasing exposure to IT after the steep drawdown’

Broadly speaking, since end-2019, we have been running with the view that India's economic cycle would change for the better relative to the five years prior. 

TAHER BADSHAH

CIO, Invesco Mutual Fund

Market outlook

While this has been challenged over the past two years of COVID, the key planks on the basis of which this view was posited namely improving bank and corporate balance sheets and constructive economic policies has only further strengthened during this period. Structurally, therefore, India appears well positioned to grow well above its own average and materially ahead of the world at large. However, tightening monetary policies, less supportive fiscal policies, a reduction in global money supply, high inflation, and the possibility of a recession in Europe and the US are global macro headwinds that India too will have to counter along the way. While India has adequate buffers in the form of a normalised opening-up of the economy post-COVID, strong balance sheets of listed corporates, reasonable health of household balance sheets, strong tax collections, and the government's focus on global economies are attempting to engineer a slowdown to control inflation. As a result, India's external-sector growth, which too can be said to have been a beneficiary of global liquidity tailwinds, can witness pressure even as domestic demand maintains strength. Such external risks may also manifest in the form of a higher terminal interest rate in this round of rate tightening by the RBI than the market currently would like to believe, feeding primarily through the route of a weaker currency.

Investment framework

Invesco India Contra Fund is managed with a contrarian approach and is value-biased. It has a long performance track record of 15 years. The fund is actively managed, with no market cap or sector-level restrictions.