'Valuation risk has significantly reduced'

Harsha Upadhyaya explains the reasons for his funds' lean phase in 2020-21 and the recovery thereafter

- Harsha Upadhyaya

Harsha Upadhyaya, Chief Investment Officer – Equity, Kotak Mahindra Asset Management Company (AMC), is currently India’s third largest active equity fund manager, overseeing assets worth more than ₹55,500 crore. To give you perspective, if he were a fund house, he would be the 16th-largest fund house in the country.

He recently sat down with us for an extensive chat to talk about his funds’ performances and the markets overall. During our interaction, his discipline, patience and analytical nous were evident in abundance, which also have a strong imprint in his investment decisions. Here is an edited transcript…

What is your near- and long-term assessment of the Indian market?

We need to go 18 months back when interest rates across most economies were benign, and most asset classes had performed well. Until that point (October–November 2021), valuations were quite high. With inflation climbing steadily, most of the central bankers increased interest rates, which has continued until now. Higher interest rates come with their own adverse impacts, like their impact on economic growth and even on corporate profitability. If an investor had bought at that time when valuations were at their highest, their portfolio could be very volatile.

From a news-flow perspective, we will be impacted by what happens in the international markets, resulting in higher volatility in Indian markets. That said, India’s position is more resilient than other countries. Inflation is likely to moderate in the near future. Once it is under control, we believe markets can start to have an upward bias.