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What is your outlook on China? Do you think it will grow at a steady pace from now on and the worst is over?
In my view, Chinese authorities will maintain a balanced growth in China. Their primary objective is to create 10 million jobs per annum and to have a smooth transition from investment-led growth to consumption-led growth. China will try to maintain the growth rate between 6.5 and 7 per cent and it will be successful in achieving this. As far as global trade is concerned, China will neither have a positive nor a negative impact.
What is your view on metals? The non-ferrous ones like aluminium, zinc…
Prices will remain range-bound. I don’t see a big upside in metals market because fixed asset formation is still quite low across the globe, though people have a lot of expectations from Trump trade; about US doing a fixed asset investment of $500 billion per annum for the next 10 years. It is because of this anticipation that the metal markets have been rallying. There is a chance of softening of prices. After considering all the uncertainties, I expect metals to remain in a band.
Do you think India is in an advantageous position compared to other EMs?
No, because of demonetisation and also because of the improvement in the global trade to a certain extent. The revival of commodity prices and the relative depreciation of other currencies have made other markets relatively stable. As an equity investor, I can’t say that India is very attractive due to revival of growth in other markets along with attractive valuation. In the last two months, due to the hardening of US bond yield, the entire emerging market has had some corrections.
In your view, which other emerging market looks good?
Honestly speaking, all are same. I’m not sure if India can give runaway return to you because countries like Russia, Brazil, Vietnam, the Philippines and Indonesia can provide better return and all are having good potential at this juncture; South Africa has corrected a lot in the last one year. So, I don’t think that India is attractive.
What’s your view on fund flows from Foreign Portfolio Investors?
The US 10-year yield is at 2.63 or 2.65 per cent, but it is not likely to go much beyond 2.80 per cent in FY17 because US GDP growth rate crossing 2.3 or 2.5 per cent looks difficult.
With inflation looking benign, the only joker in the pack, is if Trump resorts to deficit financing. Then US yields will harden, having negative impact to a certain extent on our market, but it will be positive for growth.
What is your earnings growth estimate for India Inc in FY 18?
There will be some impact because of demonetisation, especially in FY17. The consensus among brokers is 12 per cent earnings growth for FY17. While I think it certainly will be a positive earnings growth, it will be lower than the initial estimates. FY18 earnings growth depends on the speed of demonetisation. Due to stability in global trade, there is a clear possibility of earnings growth of 15-plus per cent in India.
The corrections that have happened after November, do you think that has made some sectors attractive or is there more way to go downwards?
The market is still gauging as we don’t have the real data points to say whether the demand will get destructed or not. So I don’t want to hazard a guess on whether the stocks have been adequately discounted to absorb the impact of demonetisation, whether it is positive or negative.
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