The Hindu Business Line : ‘Time to invest in stocks’

Mr S. Naren (right), Chief Investment Officer (Equity), ICICI Prudential AMC, and Mr Aman Kumar Rajoria, Head, Sales Investment Services, Wealth Management, Standard Chartered, at a post-Budget discussion in Chennai.

Our Bureau

Chennai, March 5

The Budget has indeed de-rated Indian equity valuations. Yet this is a good time for retail investors to start investing, because India’s growth story is intact, says Mr S Naren, Chief Investment Officer, ICICI Prudential Asset Management.

Speaking at a post-Budget discussion organised here by Standard Chartered Bank and Business Line, Mr Naren said that domestic (institutional) investors have been buying up stocks. “Local investors accounted for more flows in 2007,” he said, noting that while FIIs invested $5 billion on net-basis, domestic mutual funds and insurance companies bought stocks worth more.

Mr Naren feels that in 2008, $35 billion (Rs 1.4 lakh crore) of domestic funds could flow into equity markets “Indians will be saving $350 billion in 2008 and 10 per cent of allocation to equity looks reasonable,” he said.

“A lot of bad news is already (impounded) in the prices,” he said, adding that the markets were fairly priced. Retail investors should opt for systematic investment plans, allocating a portion of their monthly incomes for equities and stay invested over the long term.

Individual investors should ask themselves for three reasons for having bought a stock. If they don’t get answers, they should sell off the stocks regardless of the purchase price and put the money into stocks of fundamentally strong companies, he said.

Mr Naren said that while the Rs 60,000-crore loan waiver could result in de-rating of Indian stocks, the Budget is positive on the overall, as it would drive consumption. Observing that the Budget has been criticised for doing nothing for infrastructure development, he said that the Budget could actually do nothing. This, he said, was because the key constraint facing infrastructure development was lack of manpower, which a Budget could not possibly address in the short term.

Addressing the gathering, Mr N Ram, Editor-in-Chief, The Hindu, said that it was obvious that the Budget was made with an eye on early elections. Noting that the key issue in the Budget was the loan waiver, whose funding is as yet unclear, he said that the opinion of experts such as Dr M.S. Swaminathan was that the waiver would not help farmers much.

Noting that successive governments had not quite addressed the “agrarian crisis”, Mr Ram observed that around 1.5 lakh farmers had committed suicide between 1997-98 and now. Over two-thirds of the suicides happened in Maharashtra, Andhra Pradesh, Karnataka, Madhya Pradesh (including Chhattisgarh) and Kerala — States that are not the most backward.

Mr Ram said that experts such as Dr Swaminathan had questioned whether the recent Budget would reduce the dependence of farmers on private money lenders.

Mr Ram said that it looked like early elections would take place, but was sure that the no party, or even a coalition, would get a clear majority.

Mr D Sampath Kumar, Associate Editor, Business Line, noted that in keeping with the fundamental principles of budget-making, the Finance Minister had sought to reallocate resources in favour of those who needed urgent attention.

He said that more serious than fiscal deficit was the deficit in administration which resulted in financial allocations not fully serving their purpose. For example, he said, the area under irrigation had only shrunk over the last three decades despite increasing outlays on irrigation infrastructure.

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