Retail investors will bring stability to the market
“We expect a 25 bps rate cut on September 18. This rate cut would be an admission of an economic slowdown in the US,” says Religare group COO Sachindra Nath.
By Shailesh Menon, TNN |
MUMBAI: “We expect a 25 bps rate cut on September 18. This rate cut would be an admission of an economic slowdown in the US,” says Religare group COO Sachindra Nath. More thought needs to be given to the subprime issue. While Asian countries may not get directly impacted by it, liquidity may be a concern, said Mr Nath told ET. He also spoke about the investment approach to be adopted by investors in the current market. Excerpts:
We have been experiencing an economic boom over the past few years. Do you expect any downtrend in the months to come that could upset the market sentiment? What are your (sectoral) predictions for the third quarter?
We do not expect any economic downtrend or slackening of corporate fundamentals in the near term. The Indian economy will continue to be led by strong demand from core sectors like energy, steel, cement and infrastructure. These sectors will have a ‘rubbing off’ effect on other sectors like telecom, banking and consumer durables. India will remain a ‘demand-pull’ economy given its young demography and nascent infrastructure and industrial capacities. In the near term, we are bullish on construction, power, equipment manufacturing and banking sectors. We are maintaining caution on IT shares and a stock-specific approach in pharma and auto companies.
The equity market in the past few months has taken investors on a roller coaster ride. What is your prognosis on the market?
In the current scenario, investors need to be clear about their investment objectives. Though we believe, a safe and secular economy exists in India, in terms of scale, factors like interest rates, forex, the risk-reward ratio of the market needs to be tracked. As far as retail investors are concerned, they should adopt a long-term strategy with planned entry points at regular market corrections. This strategy would help investors pocket a decent 20-25% return on equities. Going forward, India, being a matured and profitable market, will keep attracting huge inflows.
What is the view of FIIs on Indian markets, considering that several foreign brokerages are still underweight on India?
Indian market will remain in the same valuation range (17-20 times PE) as long as the uptrend in our economy continues. Hence, it is relative how expensive Indian markets are. Indian economy is now on an auto pilot mode. One can see a large retail participation, which should provide more stability to the market. We do not foresee any drastic turn of events that may hamper growth.
What’s your reading of the global situation? Will a rate cut by Fed have any impact?
Yes, we expect a 25 bps rate cut on September 18. This rate cut would be an admission of an economic slowdown in the US. We do not expect the same to be replicated in India at least in the near term, but a downside revising is possible post March.
Are you expecting the RBI to meddle with interest rates in the near term?
We do not expect the RBI to cut interest rates in the near term. Interest rates are expected to remain stable primarily on the fact that credit growth has moderated to around 23-24% levels year-to-date. Now, with the beginning of ‘busy banking season’, credit growth is expected to increase and any cut at this juncture would result in incrementally higher growth over and above the comfort zone of RBI.
We have been experiencing an economic boom over the past few years. Do you expect any downtrend in the months to come that could upset the market sentiment? What are your (sectoral) predictions for the third quarter?
We do not expect any economic downtrend or slackening of corporate fundamentals in the near term. The Indian economy will continue to be led by strong demand from core sectors like energy, steel, cement and infrastructure. These sectors will have a ‘rubbing off’ effect on other sectors like telecom, banking and consumer durables. India will remain a ‘demand-pull’ economy given its young demography and nascent infrastructure and industrial capacities. In the near term, we are bullish on construction, power, equipment manufacturing and banking sectors. We are maintaining caution on IT shares and a stock-specific approach in pharma and auto companies.
The equity market in the past few months has taken investors on a roller coaster ride. What is your prognosis on the market?
In the current scenario, investors need to be clear about their investment objectives. Though we believe, a safe and secular economy exists in India, in terms of scale, factors like interest rates, forex, the risk-reward ratio of the market needs to be tracked. As far as retail investors are concerned, they should adopt a long-term strategy with planned entry points at regular market corrections. This strategy would help investors pocket a decent 20-25% return on equities. Going forward, India, being a matured and profitable market, will keep attracting huge inflows.
What is the view of FIIs on Indian markets, considering that several foreign brokerages are still underweight on India?
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Indian market will remain in the same valuation range (17-20 times PE) as long as the uptrend in our economy continues. Hence, it is relative how expensive Indian markets are. Indian economy is now on an auto pilot mode. One can see a large retail participation, which should provide more stability to the market. We do not foresee any drastic turn of events that may hamper growth.
What’s your reading of the global situation? Will a rate cut by Fed have any impact?
Yes, we expect a 25 bps rate cut on September 18. This rate cut would be an admission of an economic slowdown in the US. We do not expect the same to be replicated in India at least in the near term, but a downside revising is possible post March.
Are you expecting the RBI to meddle with interest rates in the near term?
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We do not expect the RBI to cut interest rates in the near term. Interest rates are expected to remain stable primarily on the fact that credit growth has moderated to around 23-24% levels year-to-date. Now, with the beginning of ‘busy banking season’, credit growth is expected to increase and any cut at this juncture would result in incrementally higher growth over and above the comfort zone of RBI.
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