'Valuations need to correct more for foreign flows'

With markets down nearly 12 per cent from their peaks, Daylynn Pinto sees more consolidation ahead. "Markets will persist in their downward trajectory," cautions the senior fund manager at Bandhan AMC, who oversees five schemes with assets worth Rs 20,931 crore. With over 15 years of experience in the mutual fund industry, Pinto's investment philosophy centres on 'buying at the right price', regardless of sector or investment style. In this interview, he explains his investment philosophy and details the fund house's value assessment strategy. Below is the edited transcript of our discussion. What key factors or catalysts could trigger a recovery in the Indian equity markets over the coming months? There have been a couple of issues over the last six months. Indian markets have been a little more turbulent than we would like them to be, and I think part of this is due to global factors and part local factors. Following the US elections, the global level of uncertainty has escalated due to the policy announcements that we've heard from the US. This issue has definitely created some amount of uncertainty, not only in India but across the world. Simultaneously, on the Indian side, we unfortunately had a slowdown not only in our economy but also in the earnings of most of our companies. That's the first time that we have seen something of this nature over the last three to four years. The market was fairly euphoric and exuberant maybe six months ago, both on the earnings side and the extremely strong macro footing. I think, to some extent, the recent policy directions of the US and the slowdown in domestic growth and earnings have derailed what was otherwise a very secular bull story for Indian equity markets. That said, I think going forward, from a recovery perspective, there are two or three things that investors are most concerned about. I believe there needs to be some more clarity on US policy. I think that is something that we are all very closely watching out for. The second concern is the Fed's ability to implement rate cuts this year. If the Fed manages to implement more than two rate cuts this year, it could significantly impact the capital flows of emerging markets, including India. Another aspect is whether the Chinese recovery will strengthen as we go through this calendar year. This could have significant implications for asset allocators worldwide, particularly those in emerging markets. India has traditionally been a TINA (there is no alternative) investment destination. With China's comeback, there could also be some capital flow there. However, the most crucial factor is our GDP growth and earnings story, which needs to regain momentum. We are going through a typical cyclical slowdown; we had a couple of excellent years of growth and are consolidating for the last two qu