Expect crude to drive GDP down to 8%: Karma Cap

Excerpts from CNBC-TV18's exclusive interview with Nandita Parker:

Q: First the twin concerns that we wound up last week with ‑ the currency on one hand and crude on the other?

A: We are already pricing in the impact of crude on the economy. Our GDP growth rate used to be 10% and we have already knocked off 1.5% out of that as a result of high crude prices. Our base case expectation is that crude will drive the economy down to about 8% GDP growth rate this year. We are already paying in terms of higher interest rates and higher inflation. So, we are already pricing that in.

Q: Are you looking at the market having more capped downside risk than on the higher end?

A: Yes. If you recall, in March we were pricing in the end of the world as we know it, risk aversion had reached a peak. We clearly moved away from that. Even on a global basis, opposed to bail out of Bear Stearns, we are beginning to see stability in the credit and equity market. It will take time for banks to recapitalize their balance sheet. Going forward, probably on a 6-12 months basis, things will come down.

Q: What’s the call on individual sectors? There are a lot of inflation sensitive sectors at this point of time, which are getting pinched hard. Then, there is the whole debate on steel. What’s the call on the individual sectors in India?

A: Stock selection will be very important this year for generating returns. In terms of sectors, what we like is shipping, paper, and consumer goods. We like shipping because of its low valuations and high dividend yields from shipping rates.

Paper because of low valuations, demand, and pricing power; and consumer goods because of increased spending due to higher disposable income and return of pricing power.

Even outside these sectors, there are lot of stocks that have become inexpensive on about a month basis and that is our investment style and philosophy. India as a market has become very attractive from a reasonable growth standpoint, so for investors the first quarter correction has thrown up lot of opportunities versus the fourth quarter of the last calendar year. We have been buying into this correction.