Business confidence has grown significantly in India and the trajectory is set for Nifty to move higher, says Manish Prasad, MD & CEO, Institutional Equities, JM Financial . He expects GDP growth at 6.5 percent in FY16.
The markets have been on a cheerful spot with both Sensex and Nifty touching record highs in the morning session on Monday. Prasad expects a sideways move in this market without any steep price correction. “Even if there is a correction, we expect only 10 percent pullback,” he told CNBC-TV18, on the sidelines of JM Financial’s India Conference.
He advises entry in dips and says the money is flowing into financial, pharma & IT stocks. According to him, the capital goods space is still not functioning at optimum levels.
Discussing about the impending Monetary Policy Review on December 2, Prasad said RBI governor Raghuram Rajan has been doing an excellent job by targeting inflation and that there have been lot of institutional investors allocating money into private sector banks. He feels RBI not cutting rates in December or February will affect sentiment.
Speaking on the Cabinet expansion undertaken by Prime Minister Narendra Modi, Atul Mehra, MD & Co-CEO, Investment Banking, said it was a necessary step and that the markets have already factored in the development.
JM Financial sees Rs 1.2 lakh crore getting mobilised from the market via IPOs and FPOs and feels divestment will be well-received if the government decides to go for it.
Below is the transcript of Manish Prasad and Atul Mehra’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What is the mood out there? We are at all-time high, the index has already given record gains compared to any other index. When you invited various foreign institutional investors (FII) and other guests, what is the sense you are getting, will the market now want to wait for performance even a big giant like Larsen & Toubro (L&T) did not perform, is the FII community wanting to look for performance or are they willing to buy betting that the performance will come?
Prasad: If you look at what IMF is talking about, if you look at the expectations for a softening global economy, of course US is the major island over there which seems to show a decent growth and the other one in possibly the emerging market space as well with China is taking a bit of a back seat there, India obviously the growth rates are kind of coming back, we are probably growing at about 5.5 percent, expect about 6.5 percent next year, you have a backdrop of a nice commodity sell-off led by crude and other hard commodities as well.
Look at our inflation possibly kind of tapering back. So the sense that we get is that kind of investors coming into our conference, people are peering out way ahead than what possibly is in store for the next quarter or so. People aren’t focusing on the quarter, it is a kind of a structural move, the business confidence, consumer confidence is also slowly edging up, so investor confidence is quite with India.
You may have quarterly numbers and a bit of kind of a small corrections but the trajectory is pretty well set. Having said that, you will obviously see some pullbacks, it maybe driven out of global macro, global QEs, that is fine but I think the trend at the policy level, macro level as well as the business confidence slowly and definitely is edging up. So we are seeing a pretty decent sense from investors as we engage with them through the next two-three days.
Sonia: What is the most likely scenario in your mind in the next six-twelve months? Do you expect a time wise consolidation in this market if we do get some signs of a pullback or do you think it could be a price wise correction?
Prasad: My sense is if you saw the volatility in October as an instance in point just to indicate as to what is happening, there are only basically two markets that are hitting all time new highs, it is the US markets and India. So even if corrections do come about, I do not expect a steep price correction, consolidations can easily happen in a band of 10 percent, nothing taking away from that but those are in my opinion price points to get into the market place in India. You are looking at FY16 and FY17 growth rates coming about easing of interest rates possibly into Q1 of next year. I am talking about fiscal — so by and large, I sense it is going to be a sideways move because of what you are seeing globally. I don’t think there is anything that is borne out of India. So I don’t see deep price corrections in India. 10 percent is a given, which you can see possibly in 7-8 days of a correction as well globally. So it is pretty synchronised in that sense in my opinion. I do not see a deep correction in terms of price because markets will held up, it is in a structural kind of a move heading into a multi-year kind of a rally building up because of the economic tailwind and backdrop.
Latha: Any thoughts on the expansion of the ministry itself that was announced over the weekend?
Prasad: What we are seeing and as a statement is maximum governance and minimum spread over there so yes expansion necessary because started out with the smaller set needs to percolate down.
Mehra: I think right now the expansion, which has been announced was pretty much factored in. Some of the names announced on Sunday were pretty credible names. Market has given a thumbs up to that. We are seeing that in the market, these are all credible people, they come from a background where they have performed and they are not new to the economy, they have worked in the backdrop and we continue to believe that they will continue the good job, which has been done.