Gaurav Misra, co-head of equities at Mirae Asset Investment Managers, has a constructive view on Indian equities at current levels. "While benchmark indices could deliver those kinds of returns (double digits), I expect many stocks to do well in this period. At this moment both parameters (domestic macros and corporate earnings growth) are looking steady and not a cause of undue concern," he says in an interview to Moneycontrol.
With an experience of over 23 years in institutional and private equity, Misra says "US policy response will be the bigger driver for equity outlook in the short term" than Ukraine-Russia tensions.
Is it time to be more cautious and do you expect a significant correction in the coming months?
Equities as an asset class are more volatile and it is best to have a longer time horizon. It is difficult to predict the short term movement of the market. The short term will be driven more by global cues and there are well known reasons for uncertainty to abound. Investors with a longer investment horizon should look at this period of volatility to build/strengthen his/her equity exposure adequately.
Do you think Ukraine-Russia tensions, which continue to weigh on global markets, pose a bigger risk for equity than other risks including inflation and US Fed tightening?
I think US policy response will be the bigger driver for equity outlook in the short term. In a way, for markets across the world, it is important that US policy is optimum for the inflation-growth trade-off they are facing in the domestic market. While the US growth outlook is good, an inappropriate policy response to the inflationary situation can hurt the growth outlook for more countries besides the US.
Capital goods and power indices have outperformed every other index in the last four months. What is the reason behind the outperformance and are you advising to invest in both the segments?
We have to look at returns from a forward and long period basis. Short period time frames do not signify much; additionally one should look at the composition of such indices and see if a few names have driven them up. I think investors should look to construct a well balanced portfolio.
Overall, investment opportunities are spread across various sectors including capital goods. Firms within the capital goods segment address various end industries – textiles, defence, metals, railways, power, commercial vehicles, renewables, etc. Many of these end industries do have a robust outlook. An investor should pick his businesses/stocks judiciously, accounting for the growing opportunity, strength of business model and management quality.
Do you expect private capital expenditure (capex) to pick up strongly in FY23?
As a base case I expect a gradual pickup in private capex. This will be aided by policy support – tax concessions on incremental capex, PLI (production linked incentive) schemes, and an overall broad-based growth of the Indian economy. Some pockets within this could do better.
Can you name the sectors which could be key to economic recovery in the coming years?
I expect a broad-based recovery in the coming years. Structurally, there are industries ranging from financial products/services to discretionary consumption (including autos) which should do well. After a structural reset, real estate (and beneficiaries – homebuilding/cement, etc) should do well, commercial vehicles should revive, and telecom should emerge from a period of intense competition.
I also expect industries with a proven global competitive advantage such as IT services and pharmaceutical/speciality chemical manufacturing to do well and contribute to growth. Investors should have well-chosen businesses from these opportunities.
Can the Indian equities decouple over the next three to six months? Are you betting on double-digit returns in 2022?
I have a constructive view on Indian equities at the current levels and while the benchmarks could deliver those kinds of returns, I expect many stocks to do well in this period. Overall Indian equity performance will depend partly on the stability of domestic macros and partly on the strength of corporate earnings growth. At this moment both parameters are looking steady and not a cause of undue concern.
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