Powell or Putin? S Naren's theory of 3 Ps on who might drag Nifty down

NEW DELHI: Describing Federal Reserve's rate hike plan as a risk for equity investors in the medium-term, Dalal Street's veteran fund manager S Naren believes that there are three Ps - (Fed Chair Jerome) Powell, (Russian President Vladimir) Putin and the potential of India - that will affect investors in the days to come.

"I think the near term risk is clearly war. In the medium term, it is the Fed and the long term (opportunity) is the Indian structural story. There is Putin, Powell and the potential of India. I call it the three Ps," Naren, Chief Investment Officer, ICICI Prudential AMC, told ETMarkets.com in an interview.

In the first such hike since 2018, Powell has increased interest rates by 25 basis points in a bid to fight inflation. Signalling rate hikes at all remaining six meetings this year, the US central bank has projected its policy rate would hit a range between 1.75 per cent and 2 per cent by year’s end.

Naren, who handles assets worth $64 billion, said the solution for investors during the current phase of the market is nothing but asset allocation and systematic investment plans (SIPs). "Nothing else helps you in the long run and protects you in the near term," the money manager said, asking investors to bet on the potential of India in the long term but to not forget risk.

"We have always believed in asset allocation. Ever since the central bank-led bull market ended in November 2021, we have been stating it very clearly," Naren said.

When asked about how should one go about restructuring the portfolio in current times, he cited his ABCDEF framework - asset allocation, booster STP (systematic transfer plan), conservative investing, debt mutual funds for capital protection, equity arbitrage and fund of funds (FoF).

"We are not in an easy position at this point in time given the elevated equity market valuations and the Fed being in a tightening mode. I think we are at a more interesting period where investors have to be more disciplined. Everyone thinks that it is too easy to make money in the market. It is not the case. One has to be disciplined and that's the reason why mutual funds exist," Naren said.

ICICI Prudential Value Discovery Fund, which is managed by him, has delivered an impressive return of 25 per cent in the last one year despite all the volatility around.

"We believe that value is in a very interesting framework over the long term but you should not look at a one-year framework while evaluating value. Over the last 18 years that the fund has been in operation, there have been periods like the ones in 2007 and 2017, when the fund did not do well. But if you look at it over a longer period of time, value is a very interesting category because we try to look for areas which the markets are ignoring and where there is a big intrinsic value."