We have 2-4 more months of pain ahead: Anish Damania, IDFC Securities

Talking to Ajay Sharma of ET Now at the sidelines of the conference organised by IDFC Security, Anish Damania says given the fact that there was a very large impact of demonetisation and GST in FY18, the base becomes very low for growth to take off.

Edited excerpts:


How important is the conference going to be this year? Some of the key corporates are attending; some of the key funds have been invited. Lots of European funds are coming this time?

Yes. This is our Fourth Annual Conference and undeniably this is the largest conference which we have had here with 220 plus corporates attending over a span of three days-- 70-75 corporates each day.

It is a fairly large event and in recent times. given what happened to GST and demonetisation, it had some negative impact on the economy. But over the last one month, several steps have been taken by the government. The government has been bold enough to bring about sharp cuts in GST rates, drastically reducing the number of items in high tax bracket.

After the Golden Quadrilateral, which was a big driver from 2003 onwards, now the government has come out with the Bharatmala project; they have tried to tackle the issue of the banking NPAs by recapitalisation of banks and very innovative ways of doing things.

From my reading, it appears that maybe we have two- four more months of pain, while the economy adjusts to the new developments. But given the fact that you had a very large impact of demonetisation and GST in FY18, the base becomes very low.

You have also upgraded the Nifty target. Your latest strategy note was pretty interesting. Talk to us about the rationale that you have hiked the target to 11300 and what will be the key components of the market which will pull the index from here to higher levels?

It is very interesting that that you asked this. As I mentioned to you, it will take about three to six months for the economy to adjust to these new things and from then on, we will look at growth. It will take time for the analysts to upgrade their numbers as we go by but we have to do something in anticipation of what is going to happen. I have said that given the recent steps announced by the government, we will be increasing our forecast based on a PE multiple rerating.

We are saying that now we are looking at a PE multiple for the market at about 19.5 times on the target but as we go on to FY20, it will be a rolled over target. So, typically it is not 19.5%, in FY19, it will be somewhere around 15.5-16 times FY20 earnings as we go by and that is how the market will start looking at it over the next six months.