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AIF & PMS Chatbot

Hello there!

Welcome to AIF & PMS Experts India Pvt. Ltd.

Ashwini Shetty ,Fund Manager MARCELLUS

1) What do you think about the impact of the Ukraine war on the Indian Economy?

The biggest and the clearest impact of Ukraine war as visible in the recent months is a steep rise in inflation arising from issues like global supply chain bottlenecks. The longer-term impact would depend on the longevity of the war and typically entail significant shift in the geopolitics. My colleagues Nandita Rajhansa and Saurabh Mukherjea, part of the investment team at Marcellus, wrote an extensive blog on this subject in April 2022 The blog highlights how India looks well placed to benefit from long term geopolitical developments in the form of significant increase in the capital and trade inflows albeit with elevated levels of inflation.

2)According to you, how investors should behave in the current environment?

There will be drawdowns in fundamental performance and share prices in the near term. The investors should behave patiently and continue to remain invested in clean, quality and cash generating companies. Given the likelihood of elevated inflation as described above, the investors should avoid seeking the safety of fixed deposits, Government bonds, corporate bonds and other fixed income investments – inflation will radically erode the real value of such investments. The most sensible method to deal with a scenario of healthy economic growth alongside elevated levels of inflation is to invest in high quality companies which have the pricing power to pass on the rise in labour & raw material costs on to their customers and thus significantly outperform the market.

3) Please define the relationship between Inflation and Investment.

Inflation generally impacts the earnings of the companies in following ways: (i) high raw material costs impact the operating margins of the companies with low pricing power; (ii) Purchasing power of the consumer diminishes and thus impact the demand for goods and services of the companies; (iii) Any central bank action on interest rates to control inflation further impacts the earnings of the companies with high leverage. Again, all of this can be mitigated to a significant extent through investment in market leading & cash generating franchises which can withstand these impacts much better.

4)How do you represent yourself as a transparent and trustworthy AMC to the investors?

We do this through clear, consistent, and constant communication to the investors through webinars, newsletters, 1×1 meetings etc covering the following aspects:
• The investment philosophy and the risk reward profile of the funds.
• Sticking to the investment philosophy of the fund through different market cycles.
• Discuss the fundamental health of the portfolio companies focussing on the long-term structural aspects but also why we may be differing from the near-term market view on specific stocks. While we keep our eyes and ears open to macro/stock level developments unless it impacts the portfolio fundamentals structurally, we don’t let it cloud our longer-term view on the stocks.
• Responding to investors queries in a timely manner.

5)Should we consider investing in Mid-caps, looking at current Valuations?

Yes, however, strong emphasis should be placed on the stock selection (fundamentals) rather than purely guided by extent of price correction. We believe companies with strong balance sheets with an agile management who constantly look to deepen their competitive advantages and build growth drivers will structurally benefit from headwinds as the impact will be much more on the peers.

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