In an interview to CNBC-TV18, Arvind Sanger, Managing Partner of Geosphere Capital Management spoke about the latest happenings in the market.
According to him, goods and services tax (GST) looking much messier than expected.
Sanger does not think valuations are cheap. He expects earnings to improve going ahead.
Below is the verbatim transcript of the interview:
Anuj: Your sense on how we are placed right now in terms of Indian market. Do you get a sense that we could see a bit of a correction here purely because of valuations, the run-up to goods and services tax (GST) or do you think the liquidity will once again triumph overall these issues?
A: I think it is very hard to call the near term. The market has got a lot of good news priced in, earnings are going to recover but the market valuations are not cheap. I think one of the things that I am little nervous about short-term is the GST, it looks like it is going to be much-much messier than many of us have feared. I think there could be probably several months of major dislocations in terms of companies managing through this and stretched out payments and I am not sure, it sounds like some of the state level check posts that were supposed to be eliminated.
My work simultaneously with GST for several months, so I am a bit nervous that you could have a last quarter or so and hopefully not longer of GST rollout and causing dislocations but on the other hand there are some positive signs in terms of Reserve Bank of India (RBI) moving more decisively on the bad loan front. There is good news and bad news but all of those given that the good news is in the market; there is always a risk that near term bad news could cause some profit booking.
Surabhi: Given what you just said, the question is that this uncertainty around the rollout of GST, has this been priced into the market and this consolidation patch that we have been in or does it mean more downside?
A: I think there is probably a little bit built-in but I guess it is a question of how much. So at the end of the day we do not know what this is going to look like because there is no precedence but the reality is that GST is being rolled out and this may be part of the kind of - trying to design something by committee which always comes out in a very awkward fashion and Indian GST is about as complicated as GST, if not the most that has ever been attempted anywhere in the world with so many slabs, still so much lack of clarity and a lot of likely challenges on the front of implementation. Therefore, I am not sure that it is fully discarded. Our preferred strategy is to be a bit cautious going into it and see what plays up but on the other hand we are not sitting here and saying that the sky is about to fall, but there is a bit of near term caution in my opinion warranted in terms of how this will play out.For entire interview, watch accompanying video.