Ajay Garg is the Director & CEO of SMC Global Securities
“India will continue to outperform with the best GDP growth going forward and it is expected that the country will continue to attract more capital flows,” Ajay Garg of SMC Global Securities says in an interview to Moneycontrol.
A stabile inflation scenario as compared to other countries and sustainable growth in earnings of Indian companies have given foreign institutional investors more reasons to rely on India’s fundamentals, he believes.
The Director & CEO of SMC Global Securities with experience of about 25 years in securities, commodities and currency markets says henceforth, the market would be closely watching the decision of the central banks which, in turn, would be monitoring the economic data points for their rate action.
Thus, he sees some sideways movement along with volatility in the market for some time, which would be driven by data and policy action.
Given the comfort of valuations along with improving business outlook, investors should remain invested in the PSU banks having good business outlooks. Edited excerpts of the interview:
Do you expect a major fall in oil and industrial commodity prices in the coming months, given the rising fears of a global recession?
The interest rate hike by the US Federal Reserve along with other major central banks has led to the prospect of global economic recession. This has resulted in a fall in oil prices along with other commodities like metals, etc from their highs. Crude prices have fallen to roughly $ 80 a barrel from more than $ 120. Domestic steel prices corrected almost 40 percent in the last six months on subdued export orders in the wake of the 15 percent export levy.
Going forward, the prices may remain under pressure on the back of aggressive interest rate hikes by the major central banks and the Russia-Ukraine war. Moreover, the sluggish data from the major crude oil importer China indicates that both crude and industrial commodity prices may get hit to some extent.
Also read: The bear market blues: A diagnosis for our times
Do you see a major shift in FII money from China to India in the coming years?
Yes, a slowdown in China is a blessing in disguise for our economy. Besides, foreign investors, disenchanted with the regulatory uncertainty in China, are now getting attracted towards India’s growth story. Actually, a stabilised inflation scenario as compared to other countries, sustainable growth in earnings from Indian companies gave FIIs more reason to rely on India’s fundamentals.
India will continue to outperform with the best GDP growth going forward and it is expected that the country will continue to attract more capital flows.
After the recent corporate earnings and reduction in NPA accounts, do you see valuation comfort in PSU banks? Also, are you taking positions in the same?
The effort of the central bank and the central government to clean up the stressed balance sheets of banks has injected a new lease of life and many of them are now presenting a good investment opportunity at attractive valuations.
Also read: Global economy approach recession, central banks unchained: Reuters poll
The net interest margins of PSU banks have expanded over time, return on equities is also improving and growth is coming back. Given the comfort of valuations along with improving business outlook, investors should remain invested in the PSU banks having good business outlooks.
Do you think the downside as well as the upside in IT stocks will be capped for a couple of quarters? Are you turning bullish on the space now?
The global recession is expected to impact the business of Indian IT and digital transformation services. Even as high attrition rates continue to hurt the IT services sector, companies seem to have begun cutting their hiring plans.
On the flip side, the consistent growth in the cloud computing business of IT companies and rupee depreciation will certainly cap the downside. However, in the long term, the IT sector looks promising.
Do you expect a significant impact of rising interest rates on real estate? Do you think one should invest in real estate stocks in a portfolio or should avoid them now?
The real estate sector is banking on the demand momentum despite higher interest rates and biting inflation. The recent festive season has brought more energy to the sales, especially commercial and premium residential, and the real estate developers are confident that this momentum will continue.
Also read: Tech in trouble, yet some IT stocks trade above their 10-year PE averages
Mumbai Metropolitan Region (MMR), Bengaluru, Pune, Hyderabad and NCR have remained the most active residential markets in 2022 so far, both in terms of new launches and housing sales. Adding a few stocks to the portfolio will give diversification to the investment for the long term.
Do you think all economic concerns have been priced in by the market?
Global macro uncertainties and those relating to the trajectory of the Russia-Ukraine war have continued to force markets to witness volatile movement. The real impact of the recent interest rate hike is yet to be seen.
The market would be closely watching the decision of central banks which, in turn, would be monitoring the economic data points for their action on rate hikes. Thus, we may see some sideways movement along with volatility for some time, which would be driven by data and policy action.
Disclaimer: The views and investment tips given by 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.
