Karan Doshi of LIC Mutual Fund Asset Management believes that market may continue to remain volatile in short term due to uncertainties related to inflation, rising interest rates and geopolitical events.
In the medium to long run, the confluence of demographics, productivity and globalization may structurally support higher growth rate. So LIC MF continues to remain bullish in medium to long term on domestic consumption, manufacturing and export driven business, Senior Equity Research Analyst & Fund Manager with experience of 10 years in the capital markets, told Moneycontrol in an interview. Edited excerpts:
What do think about manufacturing PMI and services PMI data of last several months? Do you feel manufacturing and services activities are robust with falling input costs?
The recent economic data of manufacturing PMI and services PMI are robust. India’s August manufacturing PMI at 56.2 continues to show a sustained improvement in the demand conditions in the economy, higher production volumes and consequent inflows of new orders due to lessening of pandemic impact. It showcases that the inflation worry might be fading off as most of the commodity prices have started to soften.
The services PMI was at 57.2 in August. The most important revival has been in the expansion in job creation and traction in new businesses, pointing to better demand conditions in the industry.
India might be the brightest spot in relative comparison among other economies in the PMI chart with Eurozone in contraction and US also slowing down. This in return may set the stage for capex recovery from the private side.
Do you think the inflation concerns have peaked out now along with fall in commodity prices?
As the commodity prices have shown a significant fall from their highs, it has been a huge sigh of relief and may hint towards inflation worries peaking out. Commodity prices seem to have declined meaningfully from their highs as seen in crude oil, metals etc. as well as supply chain has also start to normalize.
I expect, this benefit, may flow down for corporates in the form of margin expansion in H2FY23 along with better demand perspective.
What are the themes you are betting on, given the resilient Indian economy compared to global peers?
The Indian economy, in our view, might be at an inflection point that may mark the start of a new virtuous growth cycle and structural in nature. India is one of the fastest growing economies in the world with the highest proportion of millennials.
We foresee Make in India (Export enhancement and Import substitution), Domestic Consumption (Trend in rising working age population and increasing disposable income), Urbanisation, Financialisation and Digital as major themes that may emerge in the next decade.
Do you see any possibility of market making a new high in the rest of financial year? What could be major drivers for the same?
Equity markets have never been a one-way journey. Markets, even in the past have remained volatile. I believe that market may continue to remain volatile in short-term due to uncertainties related to inflation, rising interest rates and geopolitical events.
I suggest focusing on the medium to long-term potential and value creation. I believe that in the medium to long run, the confluence of demographics, productivity and globalization may structurally support higher growth rate. We continue to remain bullish in medium to long-term on domestic consumption, manufacturing and export driven business.
Do you expect significant pick up in private capex cycle in coming years and will the pick-up in real estate space boost capex cycle further?
I expect that the private capex cycle might be in a healthy upward trend over coming years. India is on the verge of pick up in private capex with multiple enablers such as deleveraged balance sheets, well-capitalized banking system, historically lower interest rates and adequate demand from domestic and export markets.
More than real estate sector, I believe that ‘Make in India’ initiative and sharp rise in exports may boost the capex cycle further. We might see structural shifts in the manufacturing sector. India has multiple tailwinds such as 1) rising visibility of private sector capex led by cement, steel, Oil and Gas, Textiles, Data centres etc. 2) China+1 supply chain realignment gains in Pharma, Chemicals and Textiles etc. 3) Government push through PLI schemes
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