Trade Nivesh | If the Coronavirus situation mounts further, it will certainly have serious repercussions on the global economy.
While Budget 2020 fell short on overall general expectations and could have done more to revive consumptions or investments, we still believe that it gave enough firepower to achieve a 6 percent growth in FY21, Lav Chaturvedi, ED & CEO, Reliance Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Markets seem to be inching higher and probably climbing all wall of worries, at a time when inflation is on the rise, IIP suggests contraction and earnings have been Ok. On the global front, Coronavirus is making investors edgy. What is fueling the upside in markets?
A) Key indices like Nifty along with few key sector indices have moved up significantly. However, the action has been restricted to a relatively smaller universe of stocks.
The trend of broad market breadth parameters like the number of stocks recording fresh 52-week highs compared to stocks recoding 52-week lows clearly indicate that the participation is not as broad-based as it seems.
Further, the Coronavirus outbreak has made global investors jittery, but at the same time, it offers healthy business opportunities especially for India as we have seen that Indian manufacturers witnessed increased numbers of orders from other countries due to supply disruption from China markets.
Also, the money is flowing through ETFs and Mutual funds, both with active participation from domestic as well as overseas markets.
Low-interest rates offered by banks and suboptimal returns from other asset classes like real estate is also aiding the flows into the equities.
Q) Do you think the Budget 2020 had enough firepower to push the economy back towards 6% in FY21?
A) While Budget 2020 fell short on overall general expectations and could have done more to revive consumptions or investments, we still believe it gave enough firepower to achieve a 6 percent growth in FY21.
A series of measures to revive the rural economy as to doubling the farm income by 2022 and an 18 percent increase in the government’s capital expenditure allocation are positive steps to make desired growth.
Further, the government’s strong commitment to reviving infrastructure development under the National Infrastructure Pipeline will go a long way to ensure economic prosperity.
Q) Coronavirus concerns are mounting and if the situation escalates further do you think it will have a long-lasting impact on the Indian economy and impact earnings of India Inc.?
A) If the coronavirus situation mounts further, it will certainly have serious repercussions on the global economy. However, looking at tight measures taken by various countries, a widespread global impact appears to be difficult, but trade activities may be impacted to an extent.
For India, this could be a blessing in disguise as this may open sizeable business opportunities. In addition to this, huge consumption potential within India is enough to withstand any global slowdown.
In short, we are still not perturbed much about Coronavirus outbreak as of now and we expect this epidemic to ease out shortly.
Q) What is your take on December quarter earnings? Are there any green shoots?
A) Concerns of demand related issues continued to prevail during the quarter which was evident from muted revenue growth registered by various companies. Benign input costs aided companies to report decent operating performance.
However, if we go by the management guidance or communications after the result, most of them are of the view that rural uptick is on the cards and likely pickup in infrastructure activities will result in a healthy business environment going forward. Our in-house view is that FY21E will be a better year for corporate earnings.
Q) What is your take on LIC going public? It would no doubt become the most valued company in terms of market cap but will the government make this happen in the next 12 months or so? Challenges and opportunities?
A) We believe that LIC IPO can happen in the next 12 months or so. Apart from amendments of certain defined rules that may be required, LIC possesses a behemoth of tangible assets across the country which may need an assessment from a fair value perspective.
A successful listing will bring more transparency and will bring LIC at par with private insurance companies which will bode well for investors and policyholders.
A successful listing will bring more transparency and will bring LIC at par with private insurance companies which will bode well for investors and policyholders.
Q) Mutual fund investors are showing their confidence despite weak macros and volatile equity markets which is a positive sign. Investors have pumped Rs 1.2 lakh crore into various mutual fund schemes in January. But, this time small & midcap schemes also attracted a large sum of money. Do you think the lull in small & midcaps is over?
A) Our in-house view is that unlike last year this year is likely to see the relatively broad-based rally and quality mid-caps and small-caps are likely to outperform the benchmark.
Q) Valentine’s Day just went by – when did your love with capital markets begin?
A) My name is Lav hence I could relate better to Valentine's day! Having said that my love with Capital Markets started during my school days and I have had a healthy journey so far. Capital Market is like any marriage or love…where Commitment is of essence!
While Budget 2020 fell short on overall general expectations and could have done more to revive consumptions or investments, we still believe that it gave enough firepower to achieve a 6 percent growth in FY21, Lav Chaturvedi, ED & CEO, Reliance Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Markets seem to be inching higher and probably climbing all wall of worries, at a time when inflation is on the rise, IIP suggests contraction and earnings have been Ok. On the global front, Coronavirus is making investors edgy. What is fueling the upside in markets?
A) Key indices like Nifty along with few key sector indices have moved up significantly. However, the action has been restricted to a relatively smaller universe of stocks.
The trend of broad market breadth parameters like the number of stocks recording fresh 52-week highs compared to stocks recoding 52-week lows clearly indicate that the participation is not as broad-based as it seems.
Further, the Coronavirus outbreak has made global investors jittery, but at the same time, it offers healthy business opportunities especially for India as we have seen that Indian manufacturers witnessed increased numbers of orders from other countries due to supply disruption from China markets.
Also, the money is flowing through ETFs and Mutual funds, both with active participation from domestic as well as overseas markets.
Low-interest rates offered by banks and suboptimal returns from other asset classes like real estate is also aiding the flows into the equities.
Q) Do you think the Budget 2020 had enough firepower to push the economy back towards 6% in FY21?
A) While Budget 2020 fell short on overall general expectations and could have done more to revive consumptions or investments, we still believe it gave enough firepower to achieve a 6 percent growth in FY21.
A series of measures to revive the rural economy as to doubling the farm income by 2022 and an 18 percent increase in the government’s capital expenditure allocation are positive steps to make desired growth.
Further, the government’s strong commitment to reviving infrastructure development under the National Infrastructure Pipeline will go a long way to ensure economic prosperity.
Q) Coronavirus concerns are mounting and if the situation escalates further do you think it will have a long-lasting impact on the Indian economy and impact earnings of India Inc.?
A) If the coronavirus situation mounts further, it will certainly have serious repercussions on the global economy. However, looking at tight measures taken by various countries, a widespread global impact appears to be difficult, but trade activities may be impacted to an extent.
For India, this could be a blessing in disguise as this may open sizeable business opportunities. In addition to this, huge consumption potential within India is enough to withstand any global slowdown.
In short, we are still not perturbed much about Coronavirus outbreak as of now and we expect this epidemic to ease out shortly.
Q) What is your take on December quarter earnings? Are there any green shoots?
A) Concerns of demand related issues continued to prevail during the quarter which was evident from muted revenue growth registered by various companies. Benign input costs aided companies to report decent operating performance.
However, if we go by the management guidance or communications after the result, most of them are of the view that rural uptick is on the cards and likely pickup in infrastructure activities will result in a healthy business environment going forward. Our in-house view is that FY21E will be a better year for corporate earnings.
Q) What is your take on LIC going public? It would no doubt become the most valued company in terms of market cap but will the government make this happen in the next 12 months or so? Challenges and opportunities?
A) We believe that LIC IPO can happen in the next 12 months or so. Apart from amendments of certain defined rules that may be required, LIC possesses a behemoth of tangible assets across the country which may need an assessment from a fair value perspective.
A successful listing will bring more transparency and will bring LIC at par with private insurance companies which will bode well for investors and policyholders.
A successful listing will bring more transparency and will bring LIC at par with private insurance companies which will bode well for investors and policyholders.
Q) Mutual fund investors are showing their confidence despite weak macros and volatile equity markets which is a positive sign. Investors have pumped Rs 1.2 lakh crore into various mutual fund schemes in January. But, this time small & midcap schemes also attracted a large sum of money. Do you think the lull in small & midcaps is over?
A) Our in-house view is that unlike last year this year is likely to see the relatively broad-based rally and quality mid-caps and small-caps are likely to outperform the benchmark.
Q) Valentine’s Day just went by – when did your love with capital markets begin?
A) My name is Lav hence I could relate better to Valentine's day! Having said that my love with Capital Markets started during my school days and I have had a healthy journey so far. Capital Market is like any marriage or love…where Commitment is of essence!
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