Naveen Kulkarni, Chief Investment Officer, Axis Securities said that this is not the time to reduce equity and invest in debt instruments and people in the age bracket of 30-45 years have long investment horizons and should slowly increase allocation as these turbulent times provide good entry points to build solid long-term portfolios.

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Naveen has over 17 years of experience in the Financial Services and Telecom sectors. Prior to this he was responsible for Institutional and Retail research as Head of Research with Reliance Securities Limited.

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In an interview with Zeebiz's Kshitij Anand, Kulkarni said commodity plays are well placed to deliver solid profits. Banking stocks have corrected but will see solid earnings in FY23, and thus should deliver very good returns. Edited excerpts:

Q) Bulls have taken a back seat as bears took control and have been successful in pushing benchmark indices below crucial support levels. What is your take on markets?

A) The market will be range-bound for a while as macroeconomic and geopolitical challenges keep the volatility at elevated levels. However, post Q4FY22, clarity on the earnings cycle will emerge.

Currently, the earnings cycle is very strong and is likely to remain that way. Thus, the current dips are opportunities to build a compounding long-term portfolio.

Q) Crude oil boils to $130 recently. What is the kind of impact you see on markets, the economy, and India Inc.?

A) Crude at US$ 130 is a significant challenge for the Indian economy as it has a wide range of inflationary challenges. The government will find it challenging to manage inflation with crude at such high levels.

However, India’s crude basket is well-diversified, and the impact can be managed better. Nonetheless, if crude continues to remain at this level, real growth will come down and higher inflation will result in a stagflation kind of scenario.

Q) Will rising crude oil impact earnings growth in the March quarter?

A) The impact in the March quarter may not be significant as there is inventory in the system, but the full impact will be seen next quarter onwards

Q) What is the kind of impact you see on markets as well as reforms post-state election results?

A) We have already seen a significant number of reforms, and some reforms have not taken place. We do not expect any significant reforms with immediacy.

Q) There is no stopping of FIIs as they pull out more than Rs 18000 cr from the cash segment of Indian equity markets in just 3 sessions. What is the trend you foresee for FIIs amid the US Fed rate hike possibility and Russia-Ukraine war?

A) This is a common trend. Flows tend to be impacted before the rate hikes happen. At this juncture, outflows are likely to continue, and significant outflows have already taken place in the last six months.

However, in another quarter, the outflows should settle, and more likely inflows should start on the clear visibility of the rate hike cycle.

Q) Amid Gloom and Doom are there any money-making opportunities that investors can grab?

A) This is the time to be a little opportunistic and a bit greedy. Commodity plays are well placed to deliver solid profits. Banking stocks have corrected but will see solid earnings in FY23, and thus should deliver very good returns.

IT is another sector which should see good profitable growth. These sectors are good allocation themes in the current setup.

Q) Given the fact that the market is down more than 10% from highs – any mistakes (1-5) that investors should avoid making as volatility increases?

A) Investors should not sell any quality stocks in panic as they always come back and provide good exits. Similarly, avoid buying non-quality stocks which have been corrected optically.

Lastly, invest gradually and use the market corrections. This is not the time to make hurried decisions.

Q) How can investors look at asset allocation (considering he/she is in the age bracket of 30-45 years). Is it time to reduce equity in the portfolio and increase the percentage of debt?

A) This is not the time to reduce equity and invest in debt. People in the age bracket of 30-45 years have long investment horizons and should slowly increase allocation as these turbulent times provide good entry points to build solid long-term portfolios.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)