Current fall in oil price big positive for India: Nomura

Excerpts from Markets and Macros on CNBC-TV18 Watch the full show »

India's economic growth rate slipped to 5.3% in the fourth quarter of 2011-12, lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors. However, Vikas Sharma managing director and chief executive officer, Nomura believes, the challenges faced by the Indian economy in 2012 are very different from 1991 . "India of 1991 to India of 2012 are two different countries literally. There is a complete shift that we have seen India as a country emerge and become one of the key economies for investors to look at," he elaborated.

He expects growth of the economy to move in a positive trajectory from here onwards.  "My sense is that we have bottomed out on growth at 5.3% and people will look at an upside and play from here," he added.

Meanwhile, Brent crude prices fell below USD 98 a barrel to a 16-month low on Monday, pressured by fears of a global economic slowdown following weak US and Chinese economic data.

This fall is oil prices would be big positive for Indian economy, it would help to tackle the widening current account deficit to some extent, he said. 

Below is the edited transcript of Sharma’s interview with CNBC-TV18. Also watch the accompanying videos.

Q: You must have already spoken to a lot of people who are attending your conference, what is the first whiff you are getting, are you going to see people legging it out even with severe losses on their funds or do you think people are looking for value now?

A: I think that you have a mix house there. Most of the long investors realize and have seen this cycle, the downturn in their careers. This provides them a great opportunity to look at businesses, which are undervalued, geographies, which they think are undervalued and asset classes across the world, so there is a mixed bag.

The Asian markets have not fared well this morning, but on the positive side, you see the oil price coming down, which should help India in a big way. There is growing thought that this must be the worst and you cannot have worse than where we are. So there should be opportunities from here. Yes, people will be selective; people will play in factors and in asset classes where they are most confident about and the countries that they are worst confident about.

Q: We all know the howler of the gross domestic product (GDP) number that we got last week of 5.3%, lowest in nine years, what are investors making of the India story now? Is there more and more comparison with what took place in 1991 hence there is more need for a strong initiative as we saw in 1991?

A: India of 1991 to India of 2012 are two different countries literally. The challenges that India poses today - you say 5.3% simply because we have seen a 9% or 8% or 7%, we think 5.3% is low. In 1991, we were talking about 2%-3% or 4%. There is a complete shift that we have seen India as a country emerge and become one of the key economies for investors to look at.

Yes, 5.3% is not an ideal number, but the macro indications are that it should move from here in the positive territory. So, people will look at that number and say maybe this is the lowest growth rate that India should see in a long while to come. It also sends a good signal for most of the people that should there be certain policy changes, it will add to the growth of this country. My sense is that we have bottomed out on growth at 5.3% and people will look at an upside and play from here.

Q: Are you getting a sense from your investors that they do believe we have hit the bottom or are people thinking of another syndrome altogether that we were not an 8% country at all, is there that sense you are getting at all and hence will that stop getting reflected in valuations, multiples and investment decisions?

A: The question more is what would it take us to grow faster rather than are we a 6% country or a 7% country. The question is from 5.3% what are the variables that as a country we play with in terms of growth. Looking at what we are talking about in the twelfth plan for infrastructure, if you spend anything between USD 800 to a trillion dollars, that should provide impetus to the economy. We are talking about providing a financial inclusion that should provide an impetus to the country.