Sudip Bandyopadhyay: Indian market will continue to attract investments from global investors: Sudip Bandyopadhyay
What are the triggers on which the market is actually navigating now?
Well I think I would like to highlight a few factors which the investors need to be aware of for navigating Indian markets at this stage. I think the first point is the GDP growth of India, it has been kind of brought down by a few notches by IMF, World Bank as well as the RBI but still it is around 6.7-6.8%. This is still probably the best GDP growth for a country of a reasonably size barring Saudi Arabia for the current calendar year and our fiscal. I think this kind of economic growth is what investors will look at while investing in a country.
The second point again I will make here is that remember during the last four, five years emerging market funds have raised significant amounts from investors and these funds were supposed to be and have been deployed in the emerging markets of the world which is predominantly Brazil, Russia, India and China, BRIC as we know. Now look at what is happening in Brazil, a left wing president has come to power, Russia we all know is in the midst of a war with Ukraine and hardly any sensible fund manager will have any investments in Russia. China, we know what is happening in China as far as multiple sectors are concerned and a lot of investor wealth has been decimated in China and there is a tendency for global investors to move money out of China and significantly reduce exposure.
All this liquidity will in one way or the other try to find haven in India. The third and last factor is that Indian companies by and large are in pink of health, the balance sheets have been streamlined, unrelated assets have been shed and the cost ratios or let us say the margin performance has significantly improved.
Under these circumstances I think Indian market still warrants attention and still will continue to attract investments from global investors ensuring there is significant liquidity and consequently the capital market will retain positive bias.
Let us go on further and dissect this because even though we can see slight sluggishness in the growth trajectory so far that has been presented. What do you have to talk about say two to three quarters from now on because even though we are on a very strong footing right now but then global headwinds are still a big concern? Looking ahead do you think that recessionary and economic slowdown kind of an environment will be a bigger concern for us and that is something we really need to track?
Well I think we need to be cognisant of a couple of factors which will affect India in the next fiscal as well as next calendar; one factor is India’s overdependence on oil imports. Now we know the geopolitical problems are not behind us and that can at any point of time lead to flaring up of crude oil prices which does affect India adversely both economy and the markets. Now this is one big factor which one has to be cognisant of. The second is that there is a definite slowdown or recession in some of the leading economies of the world. Europe is probably heading into a recession, US is at a very low growth or nil growth and many other economies of the world are suffering. Now this will definitely lead to slowdown in Indian exports. Now there is no two ways about it that in a global economy which is shrinking or not growing Indian exports cannot grow, it will shrink. So we will have challenges on the export front and we may have challenges on the crude oil front which can upset the fiscal balance.
Under these circumstances of course our arrangement with Russia where we able to procure crude oil at a lower price compared to Brent crude prices is definitely a good way of cushioning the shock but I think a couple of other things we need to remember; one is the fact that domestic inflation is to a great extent imported except for the food inflation bit.
If we look at what is happening as far as food inflation is concerned, it has already started coming down and we believe that with the arrival of winter crops it should come down further and that is what the RBI has been alluding to in their commentary and if that does happen the pressure on RBI to increase interest rates further will go down significantly.
Now that does create a positive environment for Indian corporates when interest rates do not keep going up on a regular basis and may be at some point of time during the next fiscal interest rates they start again stabilising and may be coming down also that does augur well for Indian corporates.
But yes, I would accept one point that we have to be a little careful in picking up stocks. We believe that we need to be careful at least in the short to medium term of companies which have significant business and exposure in Europe and US. We should look at companies having domestic business, domestic consumers and which are dependent on domestic economy’s progress. I think careful stock selection will be the way forward as far as next calendar year and next fiscal is concerned.
What kind of sectors do you think are going to outperform ending 2022 and entering 2023?
Well one sector which we believe will outperform and has not yet moved up that much is the construction and infrastructure sector. Private capex after a long gap has started picking up. We believe public expenditure will also start picking up very soon as there is a central election 18 months down the line and governments both state and central have a lot of unspent money which they need to spend on capital expenditure. So Indian construction and infrastructure and cap good companies will do well.
They have already started moving up but I think this trend will continue so one can look at companies directly in this sector or even companies like cement, building materials and other related areas. This is one area which is a completely domestic economy focussed sector and we should look at that. We should also look at FMCG, I think we did see a little bit of slowdown in FMCG due to rural consumption and rural demand coming down on account of rural stress but I think the first signs of rural stress going away is there visible for us and as things start improving on agriculture crop arrival front we will see rural incomes going up and FMCG companies coming back and starting to perform exceedingly well.
Also, that is a safe and steady sector for investors to be in so I think I would recommend apart from construction, infrastructure, building materials and related stocks and cap good stocks one can also look at FMCG for safe haven.
As people always ask do you think this is the all time high of the market or this kind of a high also implies that there will be a fall very soon so is there an answer for this question?
Of course, there is an answer. We cannot comment on short term movements of the market and we may see some correction, some profit taking at some stage, particularly remember in the month of December normally the trading volumes come down after 15th of December significantly and we may see some profit booking. But the reality is if we look at a medium to long term or even a one year outlook the way we understand the markets I think Indian market definitely has a positive bias and new highs will be reached definitely in the next fiscal as far as Indian capital markets are concerned.
Whether we will touch 22000 or 25000 is in the realm of speculation, it will depend on a lot of other extraneous factors, including crude oil prices but by and large we will maintain our upward trajectory on a medium to long term basis.
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