In a chat with ET Now, Nilesh Shah, MD, Kotak AMC, says investors will be hoping for good senses to prevail in our neighbourhood and if that happens, then we have a great opportunity in terms of creating longer-term growth. Edited excerpts



ET Now: How are you assessing this knee-jerk reaction by the markets to the surgical strikes by India on PoK?



Nilesh Shah: Obviously it is going to create some amount of reaction in the market because it came as a sudden surprise to the market. But it is not going to change long-term investors’ outlook about India unless things escalate very badly. So as of today, people will wait and watch. Obviously, no one wants war but at the same time no one believes that it will happen. So we are in a scenario of wait and watch. Markets will remain a little bit volatile but it is not going to crash significantly unless and until things really escalate beyond anyone’s control.



ET Now: In this case, there are two obvious scenarios – a) that the situation escalates, do you then sense that the markets could crack further and if so, how much? b) If this damage and political tension between the two countries does get arrested, which clearly seems to be the aim at least from our country’s side, do you sense that there could be a sharper rebound and perhaps the market could take new highs also in that recovery mode this time?



Nilesh Shah: Definitely both the scenarios are possible but as of today, at the current levels of market, what is priced in is no further significant escalation. Clearly investors want peace and certainty of earnings growth and that is what market is pricing is today.



ET Now: Of course, we have been interacting with a lot of political experts as well and as of now perhaps it is a little early in the day to assess what could be the likely outcome. To drive home the point further as of now, are you advising that one should just ride the storm or are you advising a little bit of caution?



Nilesh Shah: We have told investors that it is difficult to predict market in the short term. So please try to invest via systematic investment plan (SIP). That advice was there even before this event, purely based on valuation concerns and potential event risks. Our message to investors is still clear. We believe the long-term growth story of India is very strong and you will continue to get event risk, some political, some economical and some global and that will create its own volatility in the market.



Take advantage of the volatility by doing regular investments via systematic investment plan or asset allocation which will probably create systematic transfer plan kind of outcome.



ET Now: SIPs aside, which of course is the best medium really for a retail participant, for someone who is more into direct equities and looking for a shorter timeframe, in the near term would you wait for the dust to settle down and see which way this political situation is really turning out to be and then deploy fresh money on the dips you have to?



Nilesh Shah: If someone is being very cautious, then that strategy will be good. When there is a storm, might as well take shelter behind an umbrella or a wall or a house. But if you are a long-term investor, then such corrections give you an opportunity to pick up your stocks at a cheaper price than the previous day. It all depends upon your risk profile. If you are conservative and cannot take volatility, go and get into shelter but you will then probably miss an opportunity also. If you are aggressive, you can take risk and then probably this is the time to go out and bet in the market and pick up stocks which you believe will work out.









ET Now: So where do we stand at this point of time because a lot of experts as well that we have been interacting with seem to be of the view that as of now yes we have seen a knee-jerk reaction but by and large the long-term story seems intact and India really should not worry because we do have a strong potential to grow.



Nilesh Shah: Today neither we nor the world can afford a serious conflict between two nuclear armed countries. We have not seen that till now in the world history. Good senses will prevail in both sides and the message was sent by India that we have a far bigger battle to fight -- poverty and unemployment -- rather than fighting each other.



My guess is that investors will be hoping for good senses to prevail in our neighbourhood and if that happens, then we have a great opportunity in terms of creating longer-term growth. Globally interest rates are negative, capital is in surplus and capital is looking forward growth. India has received the highest ever foreign direct investment. The domestic macroeconomic situation is stable in terms of improving growth and managing inflation. We are at that cusp of a takeoff and investors will be happy to see that this journey continues without any knee-jerk reactions on this side.