Mr. Harsha Upadhyaya
Chief Investment Officer of Equity and Fund Manager
Kotak Mahindra Asset Management Company Limited
Mr. Harsha Upadhyaya, CFA serves as the Chief Investment Officer of Equity and Fund Manager at Kotak Mahindra Asset Management Company Limited. He joined the fund house in August 2012. He served as Senior Vice President and Portfolio Manager at DSP BlackRock Investment Managers Pvt. Ltd. He previously served as a Senior Vice President and Head of Equity at Kotak Mahindra Asset Management Company Limited. He served as Vice President and Fund Manager of Equities at UTI Asset Management Company (P) Ltd. until July 21, 2011. Mr. Upadhyaya has several years of experience spread over equity research and fund management. His prior stints have been with companies such as DSP BlackRock, UTI Asset Management, Reliance Group, and SG Asia Securities. Mr. Upadhyaya has received the CFA charter from the CFA Institute. He received a PGDM in Finance from the Indian Institute of Management, Lucknow in 1996. Mr. Upadhyaya also earned a Bachelor of Engineering in Mechanical Engineering from the National Institute of Technology, Suratkal in 1993.
Q. What is the fund house view on the budget and the direction that the government has adopted for the next fiscal year?
Answer: The Union Budget focused on pump-priming the economy at the cost of some fiscal discipline in the short term. However, albeit at a slower pace than earlier projected, it commits to glide path of lower fiscal deficit in the medium term. While the fiscal deficit target of 3.3% of GDP for FY19 is higher than expectations, the budget also talked of limiting it to 3% by FY21. It also aims to limit Central Government Debt to GDP to 40% over the medium term. These intentions should calm the nerves of rating agencies and investors reasonably well. Significant government initiatives such as uplifting rural economy, improving agricultural sector, infrastructure development and Make in India continue through this budget as well.
Q. What impact of the LTCGs tax on equity will have on the domestic and foreign investors?
Answer: The imposition of long term capital gains (LTCG) tax of 10% (without indexation) on listed equity and equity mutual fund units is a negative for market sentiments. The immediate adverse impact however, would be contained due to the grandfathering clause which exempts long term capital gains up to Jan 31, 2018.
Q. How will it affect the market behavior in terms of managing the taxation aspect?
Answer: Any long term profits made in equities from here on will be subject to 10% taxation. So, in a sense, the investors will adjust this lower expected returns by looking for relatively higher comfort on entry valuations henceforth.
Q: How do you assess the market valuations on back of the recent small correction? Which market segments do you feel offer more opportunity? What is your fund house approach to making new investment decisions in the present markets?
Answer: One of the key concerns in 2017 was that the up-move in the markets was without any supportive earnings growth. While earnings growth has been subdued for the last few years, we think that the trend is about to reverse. Such a recovery would be one of the main per-conditions to the market sustaining current valuations. We continue to remain constructive on equities as an asset class from long term perspective. On relative basis, large cap segment offers better risk-reward as compared to mid/small cap segment in our opinion. Conservative equity investors should focus on large cap funds, and those who invest in mid/small cap funds at this juncture must be prepared to encounter possibility of higher volatility going forward.
Q. What would be your piece of advice for the new investors as well as existing investors for equities?
Answer: Prudent asset allocation and long term focus are very critical for all investors. With recent strong up-move in the market, it is not advisable to chase market momentum. SIP/ STP route allows investors to wade through volatile market conditions quite well.