Leader's View On Market
![]()
As far as the situation for India is concerned, I would say that we are in a sweet spot. Russia and China are the competing emerging markets with us. They have their own share of problems which is keeping investors away from investing into these markets. Also, China is passing through a structural change. India is performing far better largely because the new government has committed rolling out systematically those projects which have been the want of the day but have been suffering because of variety of issues. I would say that, since the government has very clearly started working in giving priorities to various activities, I think the investment will flow very systematically. So, if you look from all perspectives, India could have a very systematic investment inflow in its economy in each of these areas of infrastructure. We should be seeing a quantum jump in the GDP growth rate in the next 1.5-2 years of time and India could possibly bring the GDP growth back to upwards of 8 per cent.
On the earnings front, I feel that the Inc results could have been better. Corporate India is producing a good performance. It has managed its books well in the most challenging times. By and large, India corporate cell remained disciplined with the debt part of the finance in the books. I would say that Indian corporate have already created capacities, their financials are quite decent and they have been carrying cash in their balance sheet. In my view, we could possibly see far better results in the second half of the financial year. In my opinion, in the FY 15-17 period, India could produce a CAGR of 20-22 per cent in earnings. This means that the earnings growth will be far bigger and sharper in time to come.
Talking about currency, I feel that Indian rupee has probably seen the worst of its time. The current fall in the rupee value is also largely due to strengthening of the dollar currency. The dollar strengthening has nothing to do with the strength in the American economy at this point of time. It has largely to do with the money shifting into the American debts. I think it is going to be a near term pressure. If we end up producing eight per cent and above GDP growth, if the crude oil prices remain softened along with all other derivatives of the crude, which means that the commodity prices also remain soft , higher exports will be possible and two years down the line we may see a significant amount of advantage coming to Indian corporate in which, on one side you might have lower import bill and on other side you may have higher exports and at the same time a lower interest rate scenario, I would think that the rupee holds a very good chance to remain stable and will gradually start appreciating in every financial year.
On the macro-economic front, inflation is largely a factor of two aspects i.e. fuel and food. The fuel part of the inflation is certainly looking down, mainly because the crude oil prices are remaining down. In my opinion, the food part of the inflation will significantly look down. Currently, Indian corporate has been investing into the cold storage facilities and the godown facilities for storing grains. It is an infrastructure call which most of the Indian corporate are following right now. It may be too early to say but in the next 7-8 quarters, we should be seeing the impact of this particular measure wherein the larger part of the storage for food items including cold storages could have its impact on the price of food commodities. Presently, the edible oil prices are expected to remain soft. If this situation continues, I feel both fuel and food items will have lower inflation in character and the RBI will be in a much better position to bring down the rate of interest.
On the global front, I think the clarity is still not emerging as far as China is concerned. China may continue to pass through the adjustment period. Europe is continuing to off er the stimulus and they will have to find out ways to build Europe again. Fortunately, America is getting into the stability phase. My own sense says that America would end up attracting back the manufacturing that they discarded into the economy. All these things put together, the macro headwinds on one side remain with the concerning issues of China and Europe but the potential issues of Japan and America coupled with India could be a good catalyst in bringing the growth in other economies. I feel that we are equipped better to meet the global challenges.
The sectors which one should be looking at should be the areas where the size of the company is getting bigger in each sectors. The sectors which I find attractive are infrastructure, automobiles, commodities and banking.
I would say retail investors that this is the time where you can build your wealth. A lot of times retail investors feel that they have missed the bus. According to me, they should start putting the compounding power to their advantage. Indian markets have compounded at 17-17.5 per cent. I think that this compounding can be seen at 20-25 per cent in the next five years and investors must not miss this opportunity. They must not fall prey into buying those companies which are fundamentally not sound. They must buy those companies which are fundamentally strong where you have larger visibility of earnings and larger growth prospects.