Interview: “It Is A Win-Win Situation For Th e Indian Equity Market”
![]()
What is your take on the current investment climate of the country?
The investment climate is turning very good after a gap of three years; the settings are so good for a grand take-off for the economy. The interest rate cycle is coming downwards. Crude oil price is at a six-year low. The rupee has stabilised despite adverse circumstances in Europe. The government has taken a much required policy decision and pushed it through an ordinance which indicates urgency in getting things done. It has also promised to meet the fiscal deficit target of 4.1 per cent in the current year. The government is able to mobilise roughly around Rs 30,000 crore in a full year by raising excise duty on petrol and diesel by taking advantage of the falling crude prices.
What is your outlook for the equity markets for this year?
The equity market will give a 15 to 20 per cent return in the current year also. India is the only emerging market which is showing signs of strength. Any allocation by funds to emerging markets will find flows into the country. The government’s push to infrastructure development will create jobs and give a demand push to cement, steel and engineering companies. Meanwhile, growth in the US economy will be a boon for our software companies. The telecom sector is also on a growth path. Hence overall it is a win-win situation for the Indian equity market except for the commodities sector due to depressing world growth rate.
How do you see the markets shaping up before the budget?
The budget this year has strong expectations from all stakeholders. The finance minister has a tough job on hand to satisfy all the segments. If he is able to give a positive direction to the economy by making the right projections in the budget, then it will create a ‘feel good’ factor in the economy. Broadly the FIIs expect fiscal discipline and without any retrograde taxes along with clear policy guidelines.
Which are the global triggers that you are looking forward for?
Global triggers like the European Union’s quantitative easing will inject more liquidity into the assets. The stabilisation of China’s economy will spur demand for commodities and the world market will become stable. The continuous fall of crude prices have put many Arab countries and the Russian economy into a tail-spin by destabilsing their currency and economy. This has affected global growth. Therefore any stabilisation in these countries will be a welcome trend.
How do you view the recent rate cut and what will be the trend for 2015?
The rate cut has given the required boost to the growth of Indian economy. This is only the beginning of the trend. If the budget contains the fiscal deficit to the level of 4.1 per cent and targets 3.8 per cent in the next fiscal, another cut is quite possible immediately after the budget; also, the rating for the country may be upgraded if the fiscal target is achieved. This will give a big boost for inflow into the country.
When do you see the GDP of the country reviving and what are the factors that you attribute for the same?
The GDP has bottomed out for the time being. The IIP data shows uptick in some of the sectors like electricity and mining. The recent cut in interest rates will create more demand in the housing and automobile sectors. The fall in fuel prices will reduce the cost of transport for many industries like power, cement and automobile companies. This will create more consumption and the GDP growth will gain momentum slowly and steadily.
What is your take on the present valuations of the India markets?
The current valuation is a little stretched on the current EPS’ basis. If you look at the future EPS and take the growth projection into account then the valuation will appear reasonable. So the price movement has happened and now fundamentals will catch up with a lag as usual.
What are the domestic triggers that you are looking forward to with regard to the markets?
The major triggers for the domestic markets are the budget for 2015-16, the passage of various ordinances in the upcoming session, the road map for GST, and the auctioning of natural resources.
What are the sectors that you are currently betting on, and in which areas should investors take caution?
Currently the banking sector is the top pick of the market and will outperform the market. The revival of the economy will benefit the banks most by way of reducing the stressed asset levels. The infrastructure sector which the government is promoting is the next best in the market which will push the demand for steel, cement and engineering companies. Then the software development companies look good considering some positive developments in the US’ economy. The commodities sector requires caution in investments.
What advice would you like to give retail investors at this juncture?
Retail investors are always advised to go through the mutual fund route for investments through a systematic investment plan in equities to reap maximum benefits. That way they can spread risk and take advantage of the research capacities of mutual funds. In the current falling rate of the interest scenario investors are advised to make allocation to duration funds in the debt segment and people who want a stable income can lock their money in three-year FMPs.