Indian growth appears robust despite inflation: PN Vijay

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Indian growth appears robust despite inflation: PN Vijay

PN Vijay, Portfolio Manager in an interview with CNBC-TV18 elaborating on the global economic scenario said that in six months a lot of the risk money flowed back to G8 due to inflation. People were hoping that there would be a sustained economic recovery.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Sun TV Network BSE | NSE 30/05/12 Are Mutual Funds betting on Sun TV Network? Other Stocks in this news IVRCL | Lanco Infratech | GMR Infrastructure | GVK Power & Infrastructure | IRB Infrastructure Developers | Larsen and Toubro | ILandFS Investment Managers | Karnataka Bank | Lakshmi Vilas Bank | Karur Vysya Bank | City Union Bank | Dhanalaxmi Cotex | Ashok Leyland | Oil and Natural Gas Corporation |

PN Vijay, Portfolio Manager in an interview with CNBC-TV18 elaborating on the global economic scenario said that in six months a lot of the risk money flowed back to G8 due to inflation. People were hoping that there would be a sustained economic recovery. However, in the last one month there are grave doubts about the sustainability of that good pace of recovery in the US and some nations in Europe.

"On the other hand there is a perception that India is on the top of its rate hike curve and inflation curve. Everybody is feeling that second half of '11-12 is going to be very good. This is why I feel the FIIs have started putting in money slowly in the last 15 days. The mindset has to change given the fact that global growth is very tardy and Indian growth in spite of inflation appears to be pretty robust," he added.

Below is the verbatim transcript of PN Vijay's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: First one word on this newsflow that is emanating from Delhi and what's someone sitting in Bombay should take away from it? The Finance Minister's meeting with the investors and the other meetings that are happening at the Ram Leela and Jantarmantar?

A: What do you take away, except go and feel the excitement, go to Ram Leela and go to Raj Ghat. People are really worried that corruption is eating into the vitals of the economy and into the polity at every stage of life.

So, it is getting channelised through organized protests like Anna Hazare or through fairly chaotic protest like Baba Ramdev. But, the perception is that civil society is very upset with this government, it could doing a lot more.

That is good actually because the UPA even its best supporters would not accuse it of being very active government, if they did something to make systems more transparent. WTO for example, the biggest problem India has had is public procurement.

G8 nations have been successively complaining that India's opacity in public policy. These are all long-term things and I am sure we will come out of it a more open society

Q: More immediately what should one expect from the monsoon session of parliament because there, there are lots of apprehensions building up on how much work the government might get done given the shrill pitch we are hearing across the political spectrum?

A: I hear that but, the BJP which can stall the session with its number, the communists cannot. It is not in a mood to do that because it's on the upper hand. After several years people are seriously talking about NDA coming back to power as a government that works type of thing.

In this environment it will not suit their floor managers to really scuttle parliament because the last time they did that what did they get? After scuttling two sessions they got a Joint Parliamentary Committee (JPC) and JPC is in page 8 of the newspapers these days.

So, they would realize that as a tactic preventing parliament from passing good laws which they themselves want to pass would be counter protective. Because the civil society is saying you guys are obstructionist, you are not serious about politics etc.

The BJP will shout on the first day or something but, they let things go. And on the ground they will probably help the government pass through these economic legislations.

Also Read: US mkts historically weak in June; No shocker says Ryan Detrick

Q: What is your reading of the global situation there things have got mixed up quite a bit over the last few days, do you think we will continue to be as resilient as we have been this week?

A; Themes are changing. Just as the weather is changing themes are changing and as fundamental analysts we need to look at that

In six months due to inflation a lot of the risk money flowed back to G8 where people were hoping that there would be a sustained economic recovery. In the last one month one is seeing grave doubts about the sustainability of that good pace of recovery in the US and some nations in Europe.

On the other hand there is also a perception that India is on the top of its rate hike curve and inflation curve, this makes the Finance Minister talk about 8.5% in such a brazen fashion in North Block yesterday, which means that I think intuitively that we should get out of this sort of scared mindset of run into pharma, FMCG and think ahead.

If everybody is feeling that second half of '11-12 is going to be very good, we are in June, second half is not far away.  This is why I feel the FIIs have started putting in money slowly in the last 15 days. The mindset has to change given the fact that global growth is very tardy and Indian growth in spite of inflation appears to be pretty robust.

Q: There is potential then for the market to break that 5,700-5,800 ceiling or is it more about the market falling less than the others in the second half?

A; I am bad at driving and I am bad at these numbers so when you throw numbers like 5,600-5,700, I am bit lost. But I would say that this market would surely get out of the upper ranges sometime.

If we look at it a bit more deeply - what is Indian inflation? - Indian inflation is food inflation, fuel inflation and manufacturing inflation. If you look at the manufacturing sector  it is about 50% of inflation WPI, cement demand has come down to a growth of 5% last three months which is the lowest in last five years. Automobiles are practically on zero growth. Commodities are slipping.

So you are having a situation where you had Q4 GDP growth of 5.5% in manufacturing, which is a lowest for a long time. We are seeing a softening of the manufacturing side of the economy.

In food for example except vegetables and meat most of them are at half to one percent inflation. Pulses are at negative inflation. Oil is not going anywhere beyond USD 100 per barrel on the NYMEX. The inflation expectation in the economy is coming down. In that scenario why one should be worried too much about the Indian market, I can't say.

Q: What would you do with a stock like Sun TV now?

A: What is happening in the market is of a technical nature, I guess, the shorts getting covered, I don't know how many more shorts are left. But in the longer-term, like the ADAG pack the basic businesses are very good.

For Sun TV you cannot wish away the fact that it is the number one channel in all four states of South India. South Indian TV viewing is very high. So, the ad revenues are very robust, their DTH has been fairly successful. There is nothing wrong with the business model.

But, we have to see one more chargesheet it is  going to be filed, CBI has said that by June 30 their investigation portion would be over on the 2G. At that stage if Sun TV and Maran come out unscathed there could be a huge bull run in that stock. Otherwise till that remains, I don't see any big institutional investor coming into that stock.