Saurabh Mukherjea of Ambit Capital said the back drop at the Ambit Conference is one of buoyancy and optimism since the fund managers attending the event have seen fund inflows over the last 12-months. The inflows have been into India specific funds, he said.
The rise in oil prices is creating jitters amongst investors and another concern has been valuations, he said because the underlying economic reality is not co-relating with the valuations, so emerging market investors think flows might go to other emerging markets versus India.
However, the underlying mood still remains optimistic, investors are happy that they have made lot of money and are looking forward to make more money in the Indian market over the next 12 months, said Mukherjea from the sidelines of the Ambit India Access Conference in Singapore.
According to him, if the global economy keeps recovering and commodities like oil rally with it then India will face challenges both on the fundamentals as well as investor front, because we are large importer of commodities and if global economy recovers then investors will go to other EMs that look inexpensive from a PE perspective.
The situation in India is surreal because the macroeconomic indicators don't match the market valuations –so, one does not know whether oil or the slippage on fiscal front will prick the bubble, he said.
However, the investors are aware of this situation and still want to continue making money in India but according to him, it is likely that they will take some money off the table in India and put it in other EMs that are less demanding on valuation front. This way they will hedge their bets.
Over the next six months, it is likely that the FIIs will favour commodity oriented EMs, he said.
Talking on the rising ten-year bond yields, he said it is something that the FII debt investor will worry about but the more significant concern from stock market perspective is the three-month commercial paper rates.
The three-month commercial paper rate four years ago was 12 percent but couple of months ago, it reached 6-6.1 percent.
On the earnings front, he said next fiscal that is FY19 is likely to see double-digit earnings growth and no FY18. This year the GST pain is unlikely to melt as quickly as expected. This fiscal it still looks like a 8 percent Sensex EPS growth year, he added.For the full discussion, watch video