"Soaring inflation hurt our portfolio."

The Invesco India Tax Plan has underperformed its peers by a wide margin this year. This is not usual for the fund. It generally resists the downside quite well and has a history of falling less than its peers during a market fall. To understand what went wrong, we spoke with the fund manager, Dhimant Kothari. Besides, we also spoke with him about the current situation of the equities market. And further asked a few questions related to Invesco India Contra Fund that Mr Kothari co-manages with Taher Badshah. What's your view on equity markets reeling under factors such as inflation and tightening monetary policy, among others, and what according to you, would be the drivers for the next leg of growth? By when do you expect equity markets to recover from the ongoing slump? Tightening monetary policies, less supportive fiscal policies, reductions in global money supply, high inflation, and possibility of recession in Europe and the US are global macro headwinds. Challenges have been compounded post-Russia-Ukraine conflict, as already tight supply environment for commodities has further tightened post impositions of sanctions on Russia. In a nutshell, the global macro backdrop, from being very accommodative last year, is no longer as supportive. In India, we have a mixed bag situation, as deteriorating global growth, increase in interest rates and high energy prices are headwinds. However, a normalised opening-up of economy post-COVID, strong balance-sheet of listed corporates, reasonable health of household balance-sheet, strong tax collections and Government focus on growth, and reforms are tailwinds. Accordingly, despite weak global macro backdrop, India may witness strong near-term outcomes across consumption and investment demand. This, along with improved valuations for equities, make risk-reward favourable for long-term investors. However, medium-term outlook on growth will depend on length of the global slowdown, emerging geo-political situation and softening of global commodity and energy prices. Which are the three themes/sectors that look attractive to you given the current scenario? Which are the ones you expect to drive the returns for your ELSS and Contra fund portfolios? While there are concerns around growth on account of high

This article was originally published on August 02, 2022.