A good monsoon will trigger a 12-15 percent growth in the country, Japsal Bindra, Executive Chairman of Centrum Group told CNBC-TV18 on the sidelines of the Centrum Corporate Connect 2016 conference. GST, monsoon and impact of RBI rate cuts will be key factors to watch out for, he said.Bindra was cautious about global factors like US Federal Reserve's action on interest rates and British referendum on European Union membership on June 23. Bindra said a rate hike in June or July by the US Fed will be a dampener. There's an overhang of Brexit as well, he said.Bindra expects that the troubles affecting the banking sector will continue in the year. Banks are going through a phase of NPA recognition and there is going to be a period of pain in banking sector, he said.On the controversy surrounding Raghuram Rajan's continuance as RBI Governor, Bindra said that markets have shown goodwill for governor. Global and domestic markets have shown preference for Governor Rajan's continuance, he said.Below is the verbatim transcript of Jaspal Bindra's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Anuj: Could you start by giving us a brief on the conference and what is the mood towards India?A: This is an annual conference that Centrum conducts every year and we are calling it the Centrum Connect 2016. It is really about trying to discover new jewels in the Indian mid market size companies. We have identified several of those. There will be 50 participants. All of which have the potential to emerge as largecaps but are today undiscovered in the midcap market space.Ekta: You are showcasing around 50-60 midcap companies, what is the mood towards midcaps from foreign institutional investor's (FII) perspective at this point?A: I think the challenge with the midcap is that is, they are not as visible because they are not as well researched. We are taking it upon ourselves to pick out the interesting players and cover them in much more detail and with much more focus so that we can bring it to the attention of the FIIs. This conference is partly to address that situation.Anuj: Are there any themes that investors are interested or it still remains an individual stock-specific story?A: I think all investors have some basic criteria. They want good cash flow, they want good corporate governance, they want high promoter share holding in companies all of which we have kept as minimum common criteria among the companies we have picked. Then of course there are sector specific preferences. There is a much stronger demand for B2C today than there was before and the companies that are with the right managements, with the right potential, with the right cash flow, in the right sectors are the ones we are trying to pick and bet on. Ekta: Do you expect midcaps to outperform the frontline indices?A: That's difficult to say unless you put a time period to it. We clearly believe that in the medium-term certain midcaps will be multibaggers as we have seen in the past as well. They clearly have more room in terms of runway. Anuj: On the overall mood of the market, are you confident on the thesis of a good monsoon, goods and services tax (GST) passing and Reserve Bank of India (RBI) cutting rates and that to play out and market seeking higher highs?
A: The recent quarter earnings has surprised on the upside very strongly. Even though the earnings for the full year '17 could be subdued, but if the monsoons are good then we are definitely expecting 12-13 to 15 percent kind of growth, if the monsoons come out right.
Ekta: Would you have a yearend Nifty target on this thesis?
A: No, I won't take that chance because the year end is only one date. But I think overall the market should be growing well through the period.
Anuj: What about the Fed rate hike? Do you see a rate hike in June or July and could that spoil the party?
A: We do believe that it will be a dampener if there is a rate hike in June or July. But the market seems to be conscious of that and still outperforming; global markets have done well in the last few days and with this possibility being alive there is obviously the overhang of the Brexit decision on 23 June 23. We will have to watch for that. And for India particularly there is the monsoon as well. So I think there are quite a lot of factors into play but overall the mood is biased on the positive.
Ekta: we have seen another dismal quarter for public sector undertaking (PSU) banks this quarter, and many despite big watch lists however are confident on recoveries and upgrades to negate some of the pain in FY17. What is your sense, is FY17 going to be better for banks?
A: I think it is a very optimistic view to believe that because what we are doing right now is we are going through a phase of non-performing asset (NPA) recognition. There is a longer road ahead of NPA resolution which we have to encounter. The larger quantum we recognise, the larger is the resolution challenge. So I think there is going to be a period of pain in the banking sector.
Anuj: There has been a lot of recent speculation on the RBI Governor's term and if it would be extended. Do you think the market will see an adverse reaction if the term is not renewed?
A: The market has already shown quite a strong level of goodwill and support for the Governor. I think the market reaction is likely to be based on that. I think the choice of the Governor is really a bigger decision. It is a decision between the Governor and the government on one hand, but it's also who the alternative may or may not be. So I think it's a large decision. But things are going well and global markets as well as the domestic markets have shown very strong preference for continuance.
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