Hemant Kanawala of Kotak Mahindra Life
If India is able to sustain growth above 6 percent through this decade, it will be the fastest growing large economy, Hemant Kanawala of Kotak Mahindra Life Insurance Company says in an interview to Moneycontrol.
Outlook on global growth is muted now as all the major economies are trying to remove the excesses created by extremely accommodative fiscal and monetary policy during Covid.
The senior executive vice-president and head of equity with more than 15 years of experience in fund management industry says their portfolios are focussed on India-oriented sectors like banking, automobile and capital goods. But they are worried about global growth and hence have cautious outlook on IT and metals.
Prior to Kotak Life Insurance, Kanawala was part of the fund management team at Kotak AMC, advising the offshore funds and at Kotak Securities managing PMS. Excerpts from the interview:
With the easing of a lot of concerns in last few months, is the market inching towards fresh record highs by Diwali?
Although there have been some easing of concerns lately, there are still uncertainties in terms of trajectory of food and energy prices and geopolitical environment. As a result, central banks are not giving forward guidance and will take future action based on the incoming data.
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Markets are trading at slight premium to long term averages on FY24 consensus earnings. Hence, it should consolidate at current levels before resuming the uptrend.
Do you think the inflation has peaked out now in the US as well as in India?
Although some of the supply side factors like industrial metals and chip shortages have eased off in the last few months, some other factors are still acting as tailwind for inflation to sustain at higher levels. In the US, the job market is very tight and consequently housing demand is strong, due to which inflation is sticky.
For India, the main factor to track will be energy prices in terms of crude and coal. There was some relief of late but any upward movement in these as we approach winter can be a cause for concern for inflation in India.
What are the three key factors that make you believe that India is best placed to generate domestic demand alpha?
The first factor is the various supply side reforms in terms of lower corporate taxes and production linked incentives undertaken by the government, which should help private capex cycle.
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Second is that both corporate and bank balance sheets are healthy, which should help the corporates to undertake capex and banks to fund it.
Third and structural factor is that strong housing demand in India due to under penetration and various incentives provided by the government.
Do you think the economy is going to report best performance among global markets over a decade?
We need to evaluate performance in context of global growth. In 2003 to 2008 period, India had a growth of 8 percent plus against the backdrop of buoyant global economy. Currently outlook on global growth is muted as all the major economies are trying to remove the excesses created by extremely accommodative fiscal and monetary policy during Covid.
If India is able to sustain growth above 6 percent during this decade, it will be still the fastest growing large economy.
Do you expect the RBI to take the repo rate to 6.5 percent before taking a pause in coming quarters?
As mentioned above, we are in an uncertain world and hence RBI has decided to take monetary action based on incoming data. Inflation seems to be plateauing around 6 percent and growth outlook is muted. Hence in order to support the economy, RBI may not raise short term rates above inflation.
However, if there is a further spike in energy and food prices it can change the inflation outlook.
With the recovery in markets and easing several concerns, what are the themes that you are betting your money on?
We believe that there are both structural and cyclical factors which will support growth In India. Hence our portfolios are focussed on domestic oriented sectors like Banking, Automobile and Capital goods. We are worried about global growth and hence have cautious outlook on IT and metals.
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