No One Stock Market Theme Will Dominate 2022, Says Ashmore's Ashwini Agarwal

Investors need to be nimble as this is not a "one-sided" market where a specific theme will play through the year, according to Ashmore Investment Management Ltd.’s Ashwini Agarwal.

Amid an “uncertain” market with supply-chain bottlenecks and fears of a global slowdown, investors will get ample opportunities to buy and sell, the co-founder of Ashmore Investment Management told BloombergQuint's Niraj Shah.

“If stocks have fallen 40-50%, take a hard look. There may be an opportunity there, and if something's rallied 30-40%, don't hesitate to sell,” said the fund manager, who has been advising Ashmore Group Plc on public market equity investments in India since 2006.

According to him, specific themes or strategies that worked earlier may not be suitable in the current scenario.

“This is not a one-sided market where one theme will continue to play for the rest of the year, like what we have seen through the last 10 years, where quality growth or earning momentum or something else carried the day," he said. "I don't think we are in that market anymore.”

Agarwal expects the heightened stock market volatility to persist over the next few months before easing. “A lot of what you're seeing is also a kind of hangover from disruptions caused by Covid-19, and they should get fixed over the next three to nine months.”

The fund manager is concerned about supply blockages that have resulted from Russia’s invasion of Ukraine, but is hopeful of “normalisation as we go ahead”.

Rising oil and commodity prices are a challenge, as European Union and NATO leaders gather in Brussels to discuss measures to intensify pressure on Russia. “It is uncertain how such sanctions will be restricted even if the war ends and how it will go back to the pre-war era in terms of energy trading,” he said.

While Agarwal expects oil exploration and production to continue, the fund will stay away from the sector due to environmental, social and corporate governance concerns, he said.

The fund was looking to trim technology stocks from the portfolio three months ago, but Agarwal has decided to stay invested without adding more. According to him, while the business dynamics of Indian software services sector continues to be strong, it will be a challenge to manage costs, especially wages.

Ashmore also invests in small companies across sectors that have “manufacturing excellence and export from India as a continuing theme” and whose cost base is competitive globally. “Such companies are increasing their market share on a global basis.”

But increasing costs of energy and chemicals may increase margin pressures on such companies in the short run, he said.

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