Harish Krishnan of Kotak Mahindra Asset Management Company
India’s business cycle is better placed relative to the rest of the world, buoyed by reforms, favourable demographics, and corporate earnings. Sentiment is favourably poised, Harish Krishnan of Kotak Mahindra Asset Management Company said in an interview to Moneycontrol.
The senior executive VP and fund manager (equity), who manages large-cap, thematic equity and dynamic funds at Kotak Mahindra AMC, has more than a decade of experience in equity research and fund management.
He said relatively strong fundamentals are balanced by relatively rich valuations, thus suggesting moderation of near-term expectations in equity market momentum. Edited excerpts:
Are you worried about falling forex reserves amid rupee weakness and elevated oil prices?
Our external vulnerability has definitely gone up, with the strength of the dollar as well as the fall in our overall reserves. While we are better off than in 2013, given the strong reserve accumulation done in 2020-21, over the last nine months, a significant portion of this increase has been used. Hence, any further strength of the dollar and fall in reserves will have a bearing on the rupee.
Will the US Federal Reserve change its policy stance after the November policy meeting?
From a pre-committed increase of 75 basis points over the last four instances, incoming inflation and jobs data will likely influence their decision incrementally, in terms of a downshift to a 50-bps hike.
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Are the September FY23 quarter earnings better than your estimates and what do you make of management commentaries?
Consumption, especially at the bottom of the pyramid, is still challenged coming out of the Covid pandemic, while the manufacturing and investment cycle continues to be broadly robust. While there have been some hits and misses across sectors, broadly, consensus earnings estimates have been revised downward modestly.
Is the current equity market rally sustainable or will it face a setback in the coming weeks?
We really have no ability to predict near-term market movements. Driven by economic reforms in the last few years, favourable demographics, and cleaned-up balance sheets of Corporate India, sentiment is definitely favourable towards Indian equities. Of course, the challenges are more from the context of rich valuations, especially when most other asset classes globally are below their 25-year average valuations.
Also read: Indian markets have shown phenomenal resilience amid global headwinds: Chris Wood
Thus, we do think the positives of relatively strong fundamentals are balanced by the relatively rich valuations, thus suggesting moderation of near-term expectations.
What domestic themes are you super-bullish on?
We are positive on the domestic business cycle and are playing the same via:
a) Improving investment cycle–sectors like manufacturing, capital goods, real estate, cement, and large banks fall in this theme
b) Revenge consumption among aspirational Indians–sectors like retailing, travel, auto, and entertainment, which had got impacted in the pandemic are likely to see improving economic trajectories
Will India’s economic growth be robust in the coming 10 years?
Our longer-term economic prospects continue to be encouraging. Young demographics, relatively lower leverage in the system (corporate and households), and a multitude of reforms initiated in the last many years by various policymakers augur well for the long term.
However, we must also acknowledge that global conditions have turned for the worse and therefore, external demand is likely to be challenging, impacting overall growth.
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