PMS Bazaar conducted an Exclusive Interview with Mr. Anil Rego, CEO and founder of Right Horizons. This Interview is a Part of our Special Interview series, which will offer valuable insights from leading industry experts. In this Blog, we have extracted some key insights from the exclusive interview, for you to gain quality insights & investment perspectives.

Excerpts from the interview:

Key Learnings from Previous Financial Year

The stock market experiences good and bad years, with some years testing investors' patience. This year may be one of those years where markets are collapsing, such as the US and Indian markets, causing frustration among investors who see little or no returns over 18 months.

According to Mr. Rego, “This is also a challenging period for fund managers, who may struggle with underperformance, as some teams that previously did well may not continue to do so. As an investor, I monitor market cycles closely and pay attention to market valuations. In the fourth quarter of 2019, I became uncomfortable with the high valuations and chose to derisk my portfolio, which has proven to be a good decision.”

“Even when COVID hit, we did well. So, regarding learning, I think it's about being nimble, monitoring markets, and sticking to the basics, such as valuations. I also learned from studying other funds before starting our PMS that a consistent return comes from having a solid process. Therefore, we continue to follow our process, but I like to conduct a yearly check to see how we can further improve. It's important to make small tweaks and always have a learning attitude, as there is always something to take forward into the next year."

Global Geopolitics and Financial Markets: Uncertainty and Future Outlook

If we look back at the US, they experienced a banking crisis. So many things are happening globally, with China and Europe experiencing their struggles. There are many difficult times and inflection points on a global scale. This overhang has been present, and while the US experienced a sharp downturn, India was fortunate not to fall as much and fell the least among them. Of course, we have a negative opinion of the US, which is supported by data indicating that the leader of a decade tends to underperform for one or two decades. Japan has experienced this for over two decades, and China is in its second decade. Before the US, it was the leader. Therefore, we have a longer-term issue to address.

At the beginning of 2022 global economy was recovering from the pandemic. The Russian invasion of Ukraine led to supply chain disruptions, commodity prices peaking to new highs, and geopolitical tensions. The Chinese government’s Zero-Covid policy of stringent lockdowns to contain outbreaks impacted the global economy further. Nations levying sanctions on Russia had deteriorated the global growth outlook, with advanced economies poised for a slowdown.

Mr. Rego says he is not bullish on India and has good reasons for it. While some people believe that if the US sneezes, the rest of the world catches a cold, Mr. Rego thinks it's important to recognize that global economic cycles are also at play. The US went through a period of high leveraging that ultimately caused issues and defaults. India experienced a similar cycle in the last decade, with several AA-rated companies defaulting and banks struggling with high non-performing asset (NPA) numbers.

However, because India has already experienced this downturn, it is better equipped to handle future economic challenges. India is ready for a new leveraging cycle and will perform well compared to other countries. Additionally, India has implemented policies and frameworks to support its economy, which bodes well for its future success.

US-Indian Rupee/dollar

While a weak rupee may positively impact specific areas, such as remittances and redemption of foreign investments, it generally has negative implications for the overall economy. A weak rupee makes imports more expensive, leading to higher inflation, increased expenses, and lower savings.

This can result in higher interest rates, making loans more expensive and negatively impacting personal finances and budgets. While a weak rupee may benefit export sectors, it can also create challenges for importers. It may also negatively affect investments made abroad, foreign education, and travel. A weak rupee is not considered good for the economy in the long run. Hikes, US growth conditions, and FII selling due to persistent domestic flows. This can be attributed to the Indian government's policies that have supported growth in multiple sectors, making India a relatively better performer than other advanced and emerging economies.

However, the markets are also expected to be volatile in the near term due to the recessionary conditions in the US and Europe. Despite this, over the medium to long term, the Indian markets are expected to perform well due to intact earnings growth. It is important to note that while domestic flows have been a key driver of the Indian market's resilience, external factors can still impact it. It is, therefore, essential for investors to remain vigilant and diversify their portfolios to manage risk.

Mr. Anil Rego discussed several other questions in detail during the interview. Click the appended link below to relive the entire interview:

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