Shailendra Kumar of Narnolia Financial Advisors
“During this decade, India surely would be a larger economy than Germany and will be slightly ahead of the current third largest economy Japan,” Shailendra Kumar of Narnolia Financial Services says in an interview to Moneycontrol.
He believes earnings growth will remain structurally strong for multiple sectors going forward as India progresses during this decade.
During the current decade, not only will consumer-facing segments still do well but other sectors will also join the party in terms of earnings performance, says the Co-Founder and Chief Investment Officer with experience of over two decades in fund management and investment advisory.
Having a growth-in-value investing style, Kumar says banking, retail and corporate, insurance, automobiles & components, capital goods, and manufacturing will see consistent earnings growth in the current decade.
What are the best themes that one can keep in portfolio for a longer time frame and why?
Financial sector companies in recent times have started a phase of out-performance and this is structural in nature. For a decade, credit growth in India after highs in 2011 has remained tepid on an aggregate basis in a YoY growth sense.
At the same time, Indian lenders were struggling with non-performing assets. But during the last 3-4 years, non-performing assets have been provided for and the balance sheet of majority of Indian lenders is in much better shape. Fresh NPA creation on incremental books is minimal.
Also now credit growth has started taking off and there is a long runway ahead for this growth to persist. Other sub-segments inside the financial sector like insurance and capital markets also appear good for long-term wealth creation.
What do you expect from the Union Budget 2023? Also will it largely be focused on general elections 2024?
Surely the Union Budget 2023 will have elements targeted towards the general election in 2024. But if we look at the recent past, the majority of policy reforms and initiatives have happened outside the budget process.
Tax collection, both direct and indirect, is continuing to be strong for the current fiscal and it will allow the Finance Minister to roll out tax concessions and social programmes without diluting the fiscal balance.
The size of capital expenditure and initiatives targeted for the MSME sector are to be monitored.
Do you think India will become the third largest economy in the current decade considering several initiatives and reforms taken by the government?
Improving ranking among various nations is about higher relative growth. During this decade India surely would be a larger economy than Germany and will be slightly ahead of the current third largest economy Japan.
In continuation with the above question, what are the challenges that India can face on its way to becoming the world’s third largest economy?
The path to progress always has challenges. While purely from economic angles the way India’s macro-economy is set, there does not appear much of a challenge. But there could be socio-political challenges domestically and geo-political challenges externally.
The world order is seeing changes and India will have to maintain a fine balance. In the recent past, India has used these global changes to its benefit to hasten its growth, and the same need to continue.
What are the sectors that can attract big amount of foreign direct investment in coming years?
In recent past India has emerged as among the top nation attracting foreign direct investments. Our size, demography, skillset, economic growth, and policy stability is appealing to global investors.
At the same time, India needs continued foreign investments to hasten its pace of growth. While we have become the world’s 5th largest economy but on a per capita basis we still have a huge room to improve.
India will continue to attract FDI in IT, the services sector, automobiles, energy, and infrastructure.
Which are sectors that can give consistent earnings growth in current decade?
Earnings growth will remain structurally strong for multiple sectors going forward as India progresses during this decade. During the last decade, there was a handful of consumer-facing stocks that had consistently delivered strong earnings growth.
During the current decade while consumer-facing segments will still do well but other sectors will also join the party. Banking both retail and corporate, insurance, automobiles & components, capital goods, and manufacturing will see consistent earnings growth.
Do you expect any kind of slowdown in domestic flow to equity markets?
Domestic investment in financial markets has seen sharp growth in recent years but there is huge room to grow even further. While the rise in interest rate will trigger some shift to fixed-income investments from equities but rapid growth in investments using financial market instruments like mutual funds away from traditional investments like real estate, gold, and bank FDs will mean that domestic flow to equity market will continue being strong.
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