Economic Normalcy Isn’t The Flip Of A Switch, UTI AMC’s Vetri Subramaniam Says

Economic indicators need to signal a move back to normalcy before a possible base formation for the markets, Vetri Subramaniam of UTI Mutual Fund said, as equities remained volatile globally because of uncertainty stemming from the coronavirus pandemic.

“We need to get past the lockdown and see how normalcy comes back,” the group president and head of equity at UTI Asset Management Co. Ltd., told BloombergQuint in an interview. “Normalcy isn’t going to be the flip of a switch; it’s going to be a gradual process.”

When that happens, according to Subramaniam, indicators like auto sales will point to a return in consumer confidence. And an increase in demand for credit will point to economic activity picking up, he said.

As of now, the three-week India shutdown—the most far-reaching measure by any government worldwide to curb the Covid-19 pandemic—has stalled all businesses barring essential items. Even ahead of the virus outbreak, economic growth had slowed to 4.7 percent in the third quarter of 2019-20 on the back of falling consumption, sagging incomes and a broader credit crunch.

The next decade would remain robust for domestic flows, he said, pointing out that participation by domestic investors has been robust. Everyone in the industry has been hand-holding retail investors to stay the course, he said. “SIP (systematic investment plans) flows have been strong and will continue to support the domestic markets.”

But some liquidation will happen, Subramaniam said, as these asset classes provide liquidity for those facing a crunch in running their core business activities, which is normal.

Subramaniam advised investors to rebalance their portfolios. “Asset allocation models that we run are suggesting that one can start increasing allocations if you have the ability and the flexibility,” he said. “It’s time to put your feet back into the water and re-balance allocations between equity and debt.”