After hitting the five-figure mark, Nifty has been playing truant and there are bouts of selling pressure seen at higher levels as the rally has been without improvement in fundamentals. Anil Sarin, CIO — Equities, Edelweiss Global Asset Management, still remains optimistic on the markets and believes that India would continue to attract inflows. Excerpts:
After hitting the five-figure mark, the Indian equity market has been volatile. Where is it headed?
Financial performance in recent quarters has not been commensurate with valuations (which have mostly gone up in the absence of strong growth in underlying fundamentals). The current correction is quite normal. We do not view this as the start of a major downturn.
While fund flows will stabilise the market, lack of good performance will prevent a runaway rise in the market in the near term. Nevertheless, we remain optimistic about the Indian markets.
How long do you think global liquidity will continue to push up Indian and emerging markets?
Global liquidity seems set to plateau in the medium term. As such, there would be pressure on emerging markets. Within EMs, India would continue to attract inflows as long as crude prices remain in check. Foreign investors remain confident about India mainly due to low political risk, and also due to strong positive intent of the current NDA administration.
What are the positive and negative triggers for the markets?
Satisfactory conclusion of the twin balance sheet problem will be a big positive for the market. Railways and Defence coming out with large-sized and long-term orders would be another structural positive.
Escalation of social tensions, spike in crude oil prices, and major incidents on China border would be negatives to watch out for.
When do you think GST will start contributing to growth and corporate financial performance?
It will take one or two more quarters before GST impact will start being felt in a meaningful manner. In the medium term, many mid-cap stocks will see the benefit of the shift towards organised sector.
When do you see private capex picking up? Why?
I don’t see that happening at least for a year as there is adequate unutilised capacity.
Do you see further rate cuts by the RBI? How do you see the banking and NBFC space in that case?
We expect further rate cuts. Private sector banks and NBFCs would continue to do well in an era of falling interest rates. NBFCs are one of my favourite sectors.
What is your comment on SEBI’s call on shell companies? Is it short- or long-term worry for you?
We welcome SEBI’s move. We would like to see similar action on unscrupulous market players, after thorough investigation. Anything that reduces malpractices in the stock markets is a welcome step towards strengthening public confidence.
What is your view on the real estate sector for longer-term view?
With the recent enactment of RERA and with strict implementation of bankruptcy code, the real estate sector will eventually become an attractive asset class. Instruments that enable general investors to participate in growth of real estate sector are much needed to reduce the boom and bust cycle of the real estate sector. However, the real estate sector will remain under pressure in the short term.