Navin Agarwal, MD & CEO at Motilal Oswal AMC, who started his career as an analyst in 1994, said they were expecting the GDP to start growing at a faster pace with nominal growth to reach above 10 percent for next few years. “This would entail a sharp jump in capital formation as well as discretionary spending.”
He feels earnings visibility as of now seems to be very high. “As a result of this, the markets may become volatile but it may turn out to be a buying opportunity.”
Q: On this Diwali, what is your mantra for wealth creation and what is your suggestion for new-age investors that are pouring in money, though the market seems to be highly valued now?
Mantra for wealth creation for us has remained the same over years, buy quality stock at the right price and give it time to perform. My advice to investors is to follow very simple strategy a) do your work before buying, don’t get lured by the momentum in any stock or the tips of the day, b) Don’t try to time the market as it is very difficult to do so, and c) Invest consistently and allow the stocks time to compound.
Q: Do you expect the economic growth to be higher than global peers (developed and emerging) in the coming years?
IMF forecasts global GDP to grow at around 6 percent for the current year and India is expected to grow at around 9.5 percent. Forecasts by most of the market participants for India are higher than most of the large developing and developed economies.
In our view, given the structural reforms, the demographics and government’s focus on growth, India is poised for better growth than most of the large economies.
Q: Are the Indian equity markets really in the strong bull run? Why?
In our view market performance is a function of earnings growth. In the past few decades market returns have closely mirrored EPS (earnings per share) growth during that period. With an expectation that the earnings would grow at double digits and capital formation cycle just starting we may be in the initial phase of a new bull run.
Q: Do you see a slowdown in primary market activity after the LIC IPO that the street expects in the last quarter of FY22?
Primary market activities have been dependent on the secondary market performance. Periods when secondary markets have performed well, we have seen a lot of IPOs and capital raises. Given our view that we may be in the initial phases of a long bull run we do not expect the activity to slow down over a longer period. If the markets turn volatile due to global liquidity events then we may see it slowing down for a couple of quarters but may not be more than that.
Q: What are the sectors you suggest on this DIWALI, that can boost the portfolio returns in the coming years? Why?
We are expecting the GDP to start growing at a faster pace with nominal growth to reach above 10 percent for next few years. This would entail a sharp jump in capital formation as well as discretionary spending. Hence, some of the key sectors to watch out for are a) providers of capital i.e. lenders, insurance companies b) deployers of capital i.e. the capital goods, real estate space etc. c) Sectors benefiting from increased spending by the customers i.e. Auto and other discretionary consumption and d) Given digitisation in the global economy IT industry could be another sector which may see good traction over the coming year.
Q: Do you think the expected inflationary pressure, Fed tapering, increase in interest rates globally, and slow job creation could dampen market sentiment?
For a short duration all this has the ability to impact the markets, however over a longer period the main driver for markets is going to be earnings. Earnings visibility as of now seems to be very high, with a lot of brokerages highlighting more than 20 percent earnings growth for Nifty companies for next couple of years. As a result of all this the markets may become volatile but it may turn out to be a buying opportunity.
Q: Do you expect significant FDI in India, and what are the sectors that can attract FDI in coming years?
The flow in India has been driven by the fact that India allows for significant growth opportunities, given its demographics and pro-business policies. The incremental data on this front has been positive and hence we can expect India to be one of the most attractive destinations for FDI.
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