This Canara Robeco's fund manager tells you how to navigate market volatility

The stock market is in a volatile phase and it is earnings that matters more today than just pure valuations, said  Ennette Fernandes, Fund Manager, Canara Robeco AMC. In an interview to BTMarkets.com, Fernandes said a recovery in earnings growth can increase the relative attractiveness of India among global emerging markets (EMs), and drive reversal in FII flows. Edited excerpts :-

Are you finding valuations attractive in investable stocks post the recent market correction? Which are the broader themes that you are positive on?
Our view is that in a volatile market, pure fundamentals led by earnings growth is paramount. While the market correction has been sharp, we continue to remain cognisant to invest in stocks where the earnings visibility is superior, rather than only focus on valuations being attractive. We remain positive on discretionary consumption as a theme, which is more structural and compounding over medium to long term basis. 

Do you think the recent changes to income tax slabs and the RBI rate cuts may drive consumption in a meaningful way? Do you like discretionary, staples or proxy plays to consumption; and why?

Urban consumption that had slowed down in last 15-18 months has been making a recovery, making the changes in income tax slabs even more opportune. We do expect the recovery trends to gather further momentum as the tax savings has a multiplier effect primarily on discretionary categories which are major beneficiaries from higher disposable income. 

The strong market volatility has not deterred investors from investing in thematic and sectoral funds. Do you think it is time for investors to focus more on large cap or hybrid funds?

With convergence of earnings growth across market caps, risk reward in terms of valuations is key. Large caps are trading at 25-30 per cent discount to Mid/Small cap. Hence large caps seem well placed. Also, Hybrid strategies can help investors during drawdowns, by reducing portfolio risk across market cycles. 

What factors could be a make-or-break deal for stock market in 2025. Do you see earnings recovering from here on?

Recovery in earnings growth, geopolitics led by US policies and improvement in India GDP growth can be key factors to decide the market direction. We estimate earnings recovery to be more back ended in FY26 as trends of pick up in capex, consumptions, normalised inflation etc reflect better.

How big is inflation a threat if Trump tariffs are indeed imposed on a full scale? Where do you see dollar index and US yields? 

Tariff implementation is expected to be inflationary in nature. However, we view, some mutual agreements to possibly be finalised, as a rising inflation can further exacerbate slowdown in global economy growth. We do expect some softening in dollar index and US yields, as policy actions get clearer. 

Do you see weak earnings and China stimulus prospects could reverse gains India made in global EM indices? Should one expect more FPI outflows ahead, and can domestic flows counter it? 

We have seen negative impact of the same already for Indian markets, with consistent FII selling since last 4 months, in spite of positive domestic flows. While valuations have corrected for the Indian markets, a recovery in earnings growth can increase the relative attractiveness of India among global EMs, and drive reversal in FII flows. 

Ahead of International Women's Day, what would be your advise to women stock/ mutual fund investors? What are the key steps to financial independence?

I would request women to take proactive interest in deciding their savings and investments be it in mutual funds or otherwise. One should target a certain percentage of income to be saved each month, which can be utilised for Systematic Investment Plans (SIPs), thereby creating a disciplined approach towards both expenditure and savings. Goal based investing is another avenue to help enhance financial independence in the long term. 

Te mutual fund industry has started seeing strong women participation of late. What would be your advice to women investors and MF industry participants in terms of balancing career and personal well-being?

I have always been a proponent of hard work in our respective professions, but giving our 100% is only possible if we always manage a balance between work and personal lives. Devoting time to personal hobbies/interests, does positively contribute to improving our efficiency at work. 

Disclaimer: The opinions expressed in this document are of personal nature and do not constitute the views of Canara Robeco Asset Management Company Limited (“CRAMC”). It is hereby expressly stated that, neither the AMC, nor its officers, the trustees, the Fund, any of their affiliates, representatives assume any responsibility for the accuracy of such information or the views thereof. Further, Canara Robeco Mutual Fund, its Sponsors, its Trustees, CRAMC, its employees, officers, Directors, etc. assume no financial liability whatsoever to the user of this document. The above views are for general information purposes only and should not be construed as any recommendation. 

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