Birla Sun Life Mutual Fund expects an economic recession to hit the global markets in next 2-3 years after recording a steady growth for the last 75 months.

Speaking to media here on Tuesday, Maneesh Dangi, co-Chief Investment Officer, Birla Sun Life Asset Management Company, said the prolonged slowdown in China coupled with commodity meltdown and huge debt on corporates in emerging markets are the key indicators that there is an 80 per cent chance that the global economy would slip into recession in next 2-3 years.

Billion dollar question

Asked on the US Fed exhibiting confidence on economic revival by hiking interest, he said the US government is, in fact, preparing a tool to manage the looming recession and it may hike the rates up to 1-1.50 percentage point next fiscal, but how long it can sustain it is a billion dollar question.

The slowdown in China is here to stay for long as it has little avenue for investment in real economy and infrastructure from here on, he said.

Shifting bets & Amtec

“As a precautionary measure, we are shifting our bets from corporate to government bonds as the spread has shrunk to 30 basis points (0.30 per cent). We had invested about ₹40,000 crore in government debt which otherwise would have gone chasing corporate bonds,” said Dangi assuring that the recent default by Amtec Auto has nothing to do with the decision.

Mahesh Patil, co-CIO (Equity), Birla Sunlife Mutual Fund, said investors should temper their expectations of 20 per cent from equity investments to a realistic level of 15 per cent as the economy faces global and domestic challenges.

The market valuations are currently attractive for long-term investors and the fund house is bullish on construction and consumption-oriented sectors besides auto, pharma and retail-focused banks.

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