‘If markets remain flat or correct further, SIP flows may slow down’

One way or the other, an extended West Asia war will impact earnings growth, said Ajay Tyagi, senior executive vice president and head of Equity at UTI Asset Management Co.He believes, “If markets remain flat or correct further, leading to poor two-three year returns, SIP (systematic investment plan) flows may slow down”.Tyagi, who directly manages about ₹2.5 trillion worth of assets, explained that while the structural shift of household savings into markets remains strong, it will see ebbs and flows rather than move in a straight line.He said that SIP inflows, currently around $3 billion, will have their own cycles and are unlikely to keep rising indefinitely.Edited excerpts:For large caps, the correction is mostly over, as they have reached a fair valuation zone. While not yet ‘cheap’, which would mean falling below long-term averages, they are close enough to offer comfort.

Conversely, mid and small-caps still trade 30% to 40% above their long-term averages. This suggests more room for correction in the broader market.

A portfolio manager’s job now is to look ‘under the hood’ for specific stocks or sectors hit harder than the general 10% market dip.We have a limited understanding of where the war is going; even the US likely miscalculated the toughness of Iran’s retaliation. History shows these conflicts last longer than expected—the Russia-Ukraine war has lasted four years, and the Hamas conflict over two.

To say geopolitics is already ‘baked in’ is incorrect. If the war continues, there will be consequences for energy prices and sourcing; we are already seeing trouble with LPG (liquefied petroleum gas) supply.