Anil Rego of Right Horizons
India is fundamentally positioned better compared to global peers in facing uncertainties and exploiting the growth opportunities presented, says Anil Rego of Right Horizons PMS in an interview to Moneycontrol.
The seasoned investor of over three decades, following a contrarian style, believes a deleveraged corporate sector and a well-capitalised and profitable banking system augur well for sustaining recovery.
However, the persistent threats to the market include inflation, ongoing interest rate hikes, slowdown in demand or muted festive demand, volatility in commodity prices, and potential recession across major economies, says the Founder and Fund Manager at Right Horizons PMS. Edited excerpts:
Do you expect the RBI to lower its growth forecast for FY23 in the upcoming policy meeting, especially after lower-than-expected Q1FY23 GDP data?
RBI’s real GDP growth projection for Q1FY23 at 16.2 percent was based on the assumptions that the improvement in business and consumer sentiment would bolster discretionary spending and urban consumption, and the government’s capex push would support investment activity, improving bank credit and raising capacity utilisation.
Per the data released, Q1FY23 real GDP grew 13.5 percent supported by the reopening of the services sector. While consumption and fixed asset investments were per expectations, growth in manufacturing dragged partly due to easing corporate profitability, which was led by rising input costs and supply shortages.
External forces may act as counterweights, but capacity utilisation in the manufacturing sector is expected to rise as the growth recovery progresses. However, we expect some downward revision in GDP growth for FY23 by RBI in subsequent meetings.
Do you think the current resilient Indian markets and economy compared to global peers can be significantly impacted in the coming months?
Indian equity’s performance in the face of global macroeconomic uncertainties and FIIs’ continued selling shows its resilience. A deleveraged corporate sector and a well-capitalised and profitable banking system augur well for sustaining recovery. India is fundamentally positioned better compared to global peers in facing uncertainties and exploiting the growth opportunities presented.
Is it time to be gung-ho on banking and financial services as credit growth has gradually improved?
The operating performance of banks in the first quarter of FY23 demonstrated a positive stance on advance growth and credit cost outlook. Growth momentum remained strong, propelled by healthy trends in the corporate portfolio. We have a favourable view of the banking sector as growth in retail, business banking, and the SME segments are expected to continue.
Do you think the run-up we have seen in the auto space will continue in the coming years? Also, do you see multi-bagger opportunities in the area?
Auto, a cyclical sector after three years of challenges, is trending upwards due to a revival in demand. The festive season is expected to improve demand further across segments. As electric vehicles (EVs) are gaining traction, growth momentum is expected to be higher, and we see multi-bagger opportunities in specific original equipment manufacturers (OEMs) and auto ancillaries.
Do you expect significant buying opportunities in the chemicals space, as India will be the fastest growing economy in the world?
Demand from industries such as food processing, personal care, and home care is driving the development of different segments in India’s specialty chemicals market.
Large capacity expansion projects for specialty chemicals are underway, pointing to future growth on the back of the China+1 strategy followed by global chemical giants.
With India being a resilient economy compared to global peers, do you think FII inflows will continue in the coming months?
Indian equities witnessed the selling of over $ 30 billion by foreign institutional investors (FIIs) amid global economic concerns. FIIs turned net buyers in July 2022 and continued in the month of August. The Indian economy is holding steady and progressing in an ocean of turbulence and uncertainty. As global central banks become less aggressive in raising interest rates, we expect the inflows to increase. However, any unexpected macroeconomic developments across economies may lead to a phase of withdrawals.
What are the real threats to the equity markets for the remaining part of the financial year?
The first half of 2022 has delivered adverse shocks that have raised inflation and significantly weighed on growth. Persistent threats to the market include inflation, ongoing interest rate hikes, slowdown in demand or muted festive demand, volatility in commodity prices, and potential recession across major economies.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
