According to Maheshwari corporate earnings growth, fall in interest rates and expanding return on equity (ROE) for corporate India will be the key drivers in the medium to long term.
The year 2015 belongs to the bulls and Indian equities will see domestic inflows soon, say most analysts. Anup Maheshwari, EVP, Head Equities & Corporate Strategy, DSP BlackRock Investment Managers is hoping to see domestic inflows of about USD 10-15 billion into equities.
He sees corporate earnings growth, fall in interest rates and expanding return on equity (ROE) for corporate India to be the key drivers in the medium to long term. "We strongly believe that the Indian economy is on the cusp of a strong growth uptrend that could herald 6-7 percent GDP growth annually over the next 5-10 years," he adds.
Betting high on India, Maheshwari is hopeful that earnings growth is likely to be around 15-20 percent per annum over the next three years and underpin strong performance of Indian equities.
Equity benchmarks staged spectacular performance in the 2014, rallying more than 31 percent(on Nifty and 6000 points on Sensex, the best annual performance in last five years, aided by Narendra Modi government's 'majority' win in Lok Sabha elections, sharp fall in inflation and crude oil prices, and hopes of reforms and rate cut by RBI.
The Indian market outperformed Asian and global peers during the year. Foreign institutional investors were the key players behind this rally, buying more than Rs 97,000 crore worth of equity shares in 2014, the biggest net purchase in the last four years.
He adds that relative returns from equities would be better than other asset classes in 2015.
“The last 4-5 years witnessed extremely large outflows from the equity markets by domestic investors into other asset classes like real estate, gold and tax free bonds. We have seen a significant change in the political and economic environment over the last 12 months. We do not expect real estate and gold to do as well going forward. In the last bull cycle between 2004-2007, domestic equity inflows per year were around 0.5 to 1 percent of the market capitalization,” says Maheshwari in a note.
On macro front, he thinks that the “Make In India” campaign and focus of the government on “ease of doing business” will help in improving the investment climate in the country and attract more investments from domestic and international firms.
Maheshwari also expects inflation to be stable over the next 6-12 months which will enable the RBI to cut interest rates starting 2015. “Lower inflation will lead to higher disposable incomes, in turn spurring domestic consumption, which has always been a strong driver of economic growth,” he adds.
(Posted by Nasrin Sultana)