‘If people start practising asset allocation, they will view volatility as opportunity’: ICICI Prudential AMC Executive Director, CIO

Three years ago, the Sensex hovered around 73,000. However, CIO and Executive Director of ICICI Prudential AMC, Sankaran Naren, identified geopolitical issues such as the war in Ukraine and high crude oil prices as factors holding the markets back. He further noted that high AI growth rates in countries like the US, South Korea, Taiwan, and Japan, coupled with Indian promoters and private equity companies offloading stocks to Indian investors at higher valuations, also contributed to market volatility.

Naren expressed concern over AI's potential long-term impact on India, emphasizing that it could be either positive or negative. He highlighted that while India's services sector is competitive, manufacturing remains a challenging area. He stressed the need for India to boost manufacturing employment to fuel economic growth.

In terms of sectors to watch for maximum returns, Naren suggested banking due to inflation and a weakening rupee, oil marketing companies benefiting from higher oil prices, and aviation potentially gaining from lower oil prices. He also pointed out that a significant fall in oil prices would ease the burden on the Reserve Bank of India's interest rate hikes.

On the domestic front, Naren commended the control of current and fiscal deficits, booming credit growth, and a thriving automotive industry. However, he highlighted challenges such as the monsoon's unpredictability and the potential negative effects of El Niño.

Regarding asset allocation, Naren stressed its importance given the external challenges. He advised that Indians should practice asset allocation to view market volatility as an opportunity rather than a source of anxiety. He recommended three categories of schemes - balanced advantage, balanced hybrid, and flexi cap - as a simplified way for investors to manage their portfolios and avoid daily market fluctuations.