Harsha Upadhyaya Discusses Market Volatility and Emerging Investment Themes

In a recent interview, Harsha Upadhyaya, the Chief Investment Officer for Equity at Kotak Mahindra Asset Management, addressed the ongoing market volatility, citing factors beyond recent events, primarily elevated valuations and persistent market challenges. According to Upadhyaya, large-cap valuations remain above historical averages, while mid and small-cap stocks are trading at a premium of 30-40% despite recent corrections.

Upadhyaya explained that the current market volatility is influenced by a mix of global and domestic factors. “While events such as China’s stabilization might seem like triggers, they were more a consequence of the market waiting for a catalyst. Elevated valuations make investors anxious, and any fundamental or non-fundamental event can lead to volatility,” he told Moneycontrol during Kotak AMC‘s launch of an MNC Fund.

Discussing the Foreign Institutional Investor (FII) outflows, Upadhyaya mentioned that domestic investors have played a crucial role in stabilizing the market, which has historically been heavily reliant on foreign capital. “India’s structural growth position remains strong. FII outflows have been significant, but the decrease in foreign investors’ dominance has made the market more balanced,” he noted.

Despite valuation disparities with China’s market and its recent underperformance, Upadhyaya is confident in India’s growth narrative, citing that structural stability positions India more favorably than its peers, which rely more on global economic growth.

Looking forward to upcoming earnings seasons, Upadhyaya anticipates a weak start but thinks the festive and December quarters could be decisive. He emphasized the importance of selective stock picking to build portfolios resilient to volatility.

Regarding Kotak’s investment strategy, Upadhyaya highlighted a shift towards large-cap stocks, noting the fund’s cautious stance in reallocating capital to sectors with stable earnings growth. “We’ve increased exposure to IT, consumption, and banking while reducing positions in auto components and industrials,” he explained.

The newly launched MNC Fund is part of Kotak’s strategy to capitalize on multinational corporations’ (MNCs) consistent performance during economic downturns. “MNCs offer stability and have historically outperformed broader indices with lower volatility,” Upadhyaya stated.

He also discussed dynamic asset allocation’s role in cushioning market volatility by adjusting equity proportions based on market conditions. “Such funds help reduce dependence on foreign inflows by adding stability,” he added.

Moneycontrol noted that they do not endorse any investment advice from experts and urged investors to consult certified professionals before making financial decisions.