History shows tariffs and trade barriers slow down growth and any slowdown globally will increase volatility in stock prices around the world, according to DSP Mutual Fund’s CEO Kalpen Parekh. He tells Ananya Grover that his advice to investors is making investing personal. Excerpts:
How do you see Monday’s market crash?
Global as well as domestic markets sharply corrected on Monday following US President Donald Trump’s tariff hikes on all the countries and some retaliations from China. This can lead to higher tariffs across the world, which in the past slowed down the global growth. In India, this uncertainty over tariffs, along with expensive valuation, resulted in the slump. It is too early to understand the second-order effects of these announcements. Markets will stay volatile and investors should react in line with their desired asset allocations.
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How are you tackling the current market fall?
Stock prices fluctuate and short-term moves are difficult to predict. This uncertainty is the inherent nature of markets. We look at the big picture – in the long term, good companies and funds that invest in them tend to rise. If we try to optimise for fluctuations, we will miss long-term gains.
Most of our funds have fallen lesser than their respective categories since the September peak partly because in some funds we had 5-10% in cash and in some we had hedged our portfolio by buying put options last year when they were cheap. We have been defensive because the valuation comfort was low. We have invested more in domestic sectors like financials and insurance because that space has underperformed in the last five years that also helped us cushion the fall.
What is your view on markets after Trump’s recent announcement?
This is a once in 70-year event and it’s too early for us to visualise first and second order impact. History shows tariffs and trade barriers slow down growth. Markets are still priced for strong growth rates in India and even in the US. Any slowdown globally will increase volatility in stock prices around the world.
Was this announcement already priced in?
To some extent, this was already priced in. Part of the fact that tariffs are coming and they will lead to uncertainties in growth and trade is what the market reflected by bringing down prices.
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