GST could be a game changer for economy & markets; put 60% of portfolio in equities: IIFL
Interview with Arindam Chanda, Head, Retail Broking at IIFL Group
As tax rates on mass consumption items come down triggering inflation downtrend, and economic growth, earnings growth for India Inc. will also improve, Arindam Chanda, Head, Retail Broking, IIFL Group, said in an exclusive interview with Kshitij Anand of Moneycontrol.
“For a retail investor, the ideal investing plan should be about 60 percent in equities through mutual funds,” he said.
Q) What are your comments on GST rates? Impact on economy and markets?
A) This would be recorded as one of the most significant reforms brought by any government in India with far reaching consequences for the economy. GST, as we all know, would subsume most of the indirect taxes and lead the country towards ‘one nation, one tax’.
As tax rates on mass consumption items come down triggering inflation downtrend, economic growth will be bolstered and support the bottom lines of most firms. This sounds good news for the market as earnings will get better.
Q) Any top 3-5 stocks which you think could impact positively on GST rates and should be on investors' radar?A) With the reduction in tax for coal, I see utilities like Tata Power and NTPC gaining. Aluminum producers like Hindalco Industries and Vedanta are also likely to benefit since
power is the major cost for these companies.
Q) What is your call on the market right now given the fact it has been a one-way journey since December 2016?A) There’s huge underlying momentum of liquidity. We have seen mutual fund flows increasing from an average of Rs 4,000 crore per month to an all-time high of around Rs9,000
crore in April.
In a scenario of low-interest rate and absence of other attractive asset class, equity market is well positioned to see sustained interest from all class of investors.
Globally too, the rarity of an economy growing consistently more than 7 percent positions India as preferred destination for foreign fund flows. We see market momentum to continue with event based corrections giving the opportunity to enter.
Q) Modi govt has completed 1000 days in office. Do you think the government has met expectations of analysts? Do you see Modi 2.0 in 2019?
A) Policy reforms have gathered momentum and with recent election results strengthening ruling coalition we believe the same trend to continue. As we expect core sectors to gather momentum, Public- Private capital expenditure additions can change the employment situations favorably in next couple of years benefiting the current Leadership in next general elections.
Q) What are you suggesting your customers at current levels – buy on dips, book profits or stay away as the market is no trade zone? And, why?
A) The move in indices doesn't tell us the real story as large no of stocks in mid and small caps category have gone up by multiple times and not by merely percentage increases. Valuations are stretched as best case scenarios are already factored in for these scrips.
It will be wise for investors to book profit in some of these expensive sectors and go for sectoral rotations since broad market momentum expected to continue.
Q) Many stocks have already made customers crorepati in the last three years. Are there any stocks which you think could do the same magic in the next 2 years of Modi govt?
A) Cement and housing finance could be amongst the best performing sectors, stocks in these sectors with the consistency of earnings are preferred. Banking is considered the barometer of economic performance - a clutch of PSU banks may positively surprise if one can be patient for a slightly longer term.
Q) Many funds are sitting on idle cash. What should be the ideal strategy for investors when it comes to investing? What should be the ideal proportion of funds, stocks, cash, gold, debt etc?A) For a retail investor, the ideal investing plan should be about 60 percent in equities through mutual funds, about 10 percent in direct equities, about 20 percent of debt and rest in
Q) Do you see a big dip in markets, something we saw back in 2015 when Nifty50 crossed 9000 levels? If yes, which factors can trigger this down move?
A) There could be corrections intermittently, but a crack doesn’t seem likely considering India’s robust economy and growth prospects. However, any black-swan moment can’t be denied. Global geopolitical uncertainties and slowdown in developed economies may weigh.
Q) How has digitisation helped your brokerage?
A) Our trading mobile application ‘IIFL Markets’ has crossed 1.2 million downloads in just one-half-years of launch and is the most downloaded app in the stock trading category in India. This has helped us significantly to reach equity investors across the length and breadth of India.Now we earn about 25% of our broking revenue through this app. IIFL Markets has 3 lakh monthly active users and caters to 40% active clients.