The market will remain range-bound in the short term and may even slip further with the worsening Russia-Ukraine war and a likely US recession, Morgan Stanley managing director Ridham Desai told CNBC TV-18 on June 7.
The surge in palm and sunflower oils and expected recession in the US were worrying markets. India was in a better position to tolerate the spike in prices than in the past.
The RBI’s off-cycle policy rate hike, which the market didn’t take well, indicated higher inflation fear, Desai said. Growth may get affected if inflation were to persist into 2023, he added.
"From Russia, Indians get the risk of much higher fertiliser prices and the government is budgeting more. But if the war doesn't end soon then higher fertiliser subsidies will carry forward to next year,” Desai said.
"It's very difficult for us to tolerate higher fertiliser prices because that leads to higher food prices, higher food prices means higher rates and that will slow our growth."
After a 35 percent earnings per share growth in fiscal 2022, he expects it to fall to mid-teens in FY23.
Desai favours industrials, banks, auto and real estate stocks. Along with discretionary consumption, he also likes travels, leisure, media and auto ancillaries.
He foresees the cement sector underperforming for the next two-three years. Many cement companies were announcing capacity expansion and that was not bad news, he said. “After three or four years you may see things will change,” he said.
"Cement sector is shaping up nicely. Utilisation rates likely to accelerate, many firms announcing capacity expansions so there will be pricing power and demand growth I think will be strong", Desai said, adding he was not worried about the cement capacity expansion plan.
"It might be bullish news. It tells that utilisation rates are going up and demand is growing. Unless companies see utilisation rates higher it will not expand capacity".
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