Naveen Kulkarni, Chief Investment Officer, Axis Securities, is optimistic about the new financial year and thinks the possibility of a 20 percent return in FY22 is very real, Earnings growth over FY21-25 will be in the vicinity of 18 percent, far higher than the last decade’s 7 percent, he says.
Kulkarni has more than 15 years of experience in the financial services industry and specialises in fixed income markets, intermediation, origination and distribution. Before joining Axis Securities, he served as the co-head of research at PhillipCapital India Private Limited.
In an interview to Moneycontrol's Kshitij Anand, Kulkarni says in April, the focus will be on earnings. He expects IT and metals to report strong numbers. Edited excerpts:
How do you view the Reserve Bank of India's monetary policy committee's April decisions as well as the future outlook?
Status quo has been maintained, which is in line with the expectation. The future outlook has changed with the imposition of lockdown-like norms in Maharashtra.
This has increased the probability of rate cuts in the future. However, we believe that over the medium term, rates will be maintained. Inflation trajectory remains the key.
Archegos fire sale is a reminder we live in a world that is vulnerable to external shocks. Top global banks such as Credit Suisse and Nomura have been burned and stand to lose close to $6 billion. How will it impact Indian markets and offshore derivative instruments?
The Archegos fire sale has been absorbed by the market and further impact will be limited. However, it is difficult to figure out if there are more Archegos-like candidates.
With cheap money around the world, markets are heavy in terms of valuations and corrections could lead to more such events, which will be difficult to predict.
At this juncture, the Archegos event is contained and impact absorbed. The implications for the Indian market will be limited.
What does President Joe Biden's multitrillion-dollar plan to rebuild America’s infrastructure mean for Indian markets?
Infrastructure spending means money moving into the real economy and the creation of an infrastructure which will result in global inflation. This will have an impact worldwide, where capacity creation will gain momentum and India should be no exception. Cyclicals, industrials and related sectors will outperform.
Equity markets closed FY21 with gains of 70 percent but it happened on a small base amid the selloff seen in March 2020. What is your outlook on markets for FY22? Which asset class could outperform?
We believe that a 20 percent return in FY22 cannot be ruled out as earnings growth over FY21-25 will be in the vicinity of 18 percent, which is significantly higher than the last decade's 7 percent. As the earnings base is low and liquidity abounds globally, returns in FY22 will be quite strong.
Global index service provider FTSE Russell has placed Indian government securities on its watch list for inclusion in its emerging markets government bond index. What is the kind of money that can come in from foreign investors?
It is difficult to predict at this juncture on the flows but all such inclusions are long–term structural positives, which will keep the flows strong.
We closed March on a flat-to-positive note. How is April likely to pan out for investors? Any big events to track?
In April, focus will be on earnings. IT and metals will report very strong earnings but BFSI will be critical. The guidance of FY22 slippages by the leading banks will be critical. Also, the impact of rising input costs on margins will be important.
However, the overall construct seems to be more positive and QoQ improvement. So, April should turn out to be a better month, notwithstanding the significant challenges of fast-spreading COVID-19.
The dollar is near a five-month high, while US bond yields are also inching up. How will they impact commodities and commodity-linked stocks?
Commodities should continue to perform even though there are near-term challenges. The cycle has turned after a long time and seems more likely to sustain.
Yields will consolidate soon and the dollar will be range-bound. So, the structural trend for the commodities remains intact.Disclaimer
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