Markets unlikely to see significant decline unless macros are mismanaged: Naren S

 Markets unlikely to see significant decline unless macros are mismanaged: Naren S

According to Naren, the fact that macro has been handled so much better in India has resulted in very little increase in interest rates.

According to Naren, the experience of other nations demonstrates that poorly managed macros are always the source of significant adjustments.

S Naren, CIO of ICICI Prudential, told Moneycontrol that as long as India's macroeconomic conditions remain favorable, markets are unlikely to see any significant declines. According to the seasoned fund manager, India has handled key indicators like inflation and the current account deficit over time in a very prudent manner. The equities markets benefit from this. Naren drew attention to the fact that, as experience in other countries has shown, markets may suffer if macros go off course.

Some issues go away if macroeconomics is handled correctly, but if it is not handled correctly and the current account depreciates, inflation worsens, or even the budget deficit becomes unmanageable, then catastrophe strikes. Thus, we should anticipate significant corrections if the macroeconomics falters at some point in the future, according to Naren.

According to Naren, the experience of other nations demonstrates that poorly managed macros are always the source of significant adjustments. For instance, rising inflation led to an increase in interest rates in the United States. "Well-managed macroeconomics is essential for well-behaved markets," he said.

In India, interest rate increases have been minimal due to improved macromanagement. However, he goes on to say that there might be a significant downside if it goes south in the future. Despite the recent market volatility, Naren said that given the present robust macroeconomic conditions, it appears improbable that India would have a situation similar to 2008.

Naren notes that from the perspective of an investor, the risk in India at the moment is not macroeconomic but rather greater valuation in comparison to other countries. I will thus be unable to inform you when high values cause money to leave India and go into other regions of the globe, even if it is really polite of me to state that there is a danger. Since India has a strong structural story, prices may really remain higher for longer, therefore I can't foresee that," he continues.