In recent months, market volatility has kept investors on edge amid fluctuating news flows. Kalpen Parekh, MD & CEO of DSP Mutual Fund, emphasized the resilience displayed by Indian policymakers over the past 5-7 years in responding promptly to negative events. This responsiveness, he stated, has not only provided a structural tailwind to the economy but has also instilled confidence in both domestic and global investors. Parekh advised investors not to be overly concerned about current events, as their impact is likely to be transient in the long term. Here are the edited excerpts from the interview:

**Market Dynamics:**
Regarding the current market scenario with both positive and negative forces at play, Parekh acknowledged the existence of both pros and cons. On the positive side, he cited the government’s efforts over the past 5-7 years, providing structural support to the economy. Despite potential economic and market cycles, the quick response of policymakers to negative events has accelerated the recovery process, instilling confidence in the eventual improvement of circumstances.

**Political Stability and Confidence:**
Parekh asserted that while money flows for stability reasons rather than political ones, stable policy-making, fair regulations, and growth drivers in the economy inspire confidence among global and domestic investors. He highlighted various reasons why different classes of investors are drawn to India, including expectations of economic growth, personal finance needs, and confidence in strong policymaking.

**Basis of Confidence:**
Parekh rooted his confidence in data rather than mere perception. He emphasized India’s large domestic market, driven by its population size, profile, and demography, indicating sustained growth relative to the global scenario. This, coupled with the expected profit growth of businesses and entrepreneurs at a compounded rate over time, supports Parekh’s conviction in equities as an asset class.

**Optimism and Green Shoots:**
Acknowledging optimism among various companies and the government’s structural measures such as Production Linked Incentives (PLIs) and lower corporate taxes, Parekh sees these as green shoots that indicate a positive economic cycle. He noted trends such as rising capacity utilization, sectoral consolidation, and growth in retail loans, all contributing to a holistic growth scenario.

**Challenges and Valuations:**
Parekh acknowledged that the major challenge lies in the pervasive positivity, leading to higher stock valuations. He cautioned investors against being overly focused on current events, as their significance is likely to diminish over the long term. Parekh emphasized the importance of long-term investment perspectives, citing equities as a safer bet in the long run despite short-term uncertainties.

**Outlook for Companies:**
Regarding the festive season, Parekh discussed challenges faced by companies, including rising input costs and a slowdown in consumer demand due to inflation. While the latter may take time to resolve, Parekh noted a softening of input costs, especially oil and commodity prices, which could lead to margin normalization for many companies in various sectors. Overall, he expressed optimism about the potential benefits for well-positioned companies in the coming quarters.