May 17, 2012, 05.12 PM IST
While investors are losing confidence on the Indian market, Rajiv Anand, managing director and chief executive officer of Axis Asset Management Company says, there is deep value in this market at this point in time. “If you are a long-term investor, these are opportunities for you to buy high quality stocks into your portfolio,” he adds.
According to him, there is value across all the sectors. “I don’t think you need to be too choosey in terms of a sector pick at this point in time. We think that there are opportunities available pretty much across all the sectors,” he adds.
Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying videos.
Q: What is your outlook on the Indian market? Do you think that we are currently working with just global equities in terms of a co-relation or do you think that we are heightened in terms of a risk-off and possible further downside because of our macro situation?
A: I think one needs to be very clear here. The problems that we are facing are all local. The twin deficits, the fiscal and the current account deficits, are two biggest problems. Trying to mitigate the impact of this and blaming this on what’s happening globally is not appropriate.
Because of the fact that you have a large current account deficit and what is happening globally, I think you are seeing an exaggerated situation in the Indian context. But that’s really what risk is all about.
I think policymakers need to understand that we need to control what is controllable. For us, what is controllable is our fisc and current account deficit. There is nothing much that we can do about what’s happening in Europe and Greece at this point in time.
Q: For the past 12 months, we have been getting continuous doses of people marking our macros down as worse. From the start of FY12, where we were still expecting 8% growth, we have seen a consistent downgrading of our growth estimates and of other macros. The process still seems to be underway. Nobody is quite buying the 7.6% on which the Budget is predicated. Even the 7.3% of the Reserve Bank is now increasingly in doubt with data. Do you think that the stock markets might get stuck in a 5,000 or maximum 5,600 kind of range for several years now, over a couple of years maybe investments are not going to make much returns?
A: Clearly to believe that we will grow somewhere in the vicinity of about 7.6%, we are just being too ambitious. Look at it from the perspective of the market. I think the market is still not sure that it has hit a trough. What that trough is? Whether it is 6.5% or 6% or 5.5%, one really doesn’t know.
But I think until one gets the confidence that they have hit a trough, the market is not going to go up in a sustained manner. For us to be able to sort of arrive at that trough, it is about policy, it is about trying to revive growth in the Indian context such that we are able to deliver over a long period of time. I think that’s the uncertainty that the market is playing for over the next 3-12 months.
Q: You said that we can’t really control what is happening in the European Union at this point in time and we can only differentiate ourselves. According to you, how do you think that we can carve this niche for ourselves and differentiate ourselves in terms of the global equity space?
A: I think if foreign institutional investors can live with underperformance within the equity space, that’s really where they are investing in and they do understand from a long-term perspective that the cyclical nature of markets will push some markets up and some markets down at various points in time. But I think what is clearly unacceptable to foreign investors is this huge drop in the rupee that we have seen over the last one year, which is almost 20%. That is by any standards huge.
I think the one thing that we should do is look to control the rupee. One of the things that come to mind is why don’t we do a dollar denominated bond, a USD 10-12 billion dollar denominated bond, 10-15 year maturity that fixes your issues on the rupee into the medium-term, brings in liquidity into the markets. You will then see some semblance of rates coming off as well. I think it then begins to build in a virtuous circle. That will in turn bring back the investment cycle. Therefore, perhaps build a bottom on this economy. I don’t think there is any question about the structural nature of our economy. But the problem is really to get to the long-term, we need the short-term fixes as well.
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