Poonam Tandon, CIO at IndiaFirst Life Insurance Company, feels the government's investment push and the reduction in corporate taxes effected earlier could help revive the corporate capex cycle.
"Our positive bias is tilted in favour of sectors such as infrastructure, cement, capital goods, utilities, auto & auto ancillary, while sectors such as BFSI, consumer durables, etc. could consolidate for the time being," she said in an interview to Moneycontrol's Sunil Shankar Matkar.
Poonam Tandon has experience and insight into financial markets and investment management in the banking and financial services sector. With a career spanning over 26 years, she has worked with MetLife India Insurance, Paternoster LLC, Securities Trading Corporation of India and Industrial Development Bank of India (IDBI), where she started her career in 1994.
While she feels the low base would aid the earnings performance of India Inc in the March quarter, Tandon believes companies sensitive to cost inflation are likely to see a risk to their earnings growth momentum.
Q: Do you think the RBI could hike rates in FY22 given the inflation? Will the bank revise its GDP and inflation forecast in April meeting?
We believe, in the near term, RBI will remain committed to supporting growth while ensuring adequate system liquidity. It may wait for another quarter before revising forecasts for GDP and inflation, especially the expectation of monsoon. We think that the Monetary Policy Committee (MPC) may consider a long pause, if inflation remains within its tolerance level.
Q: What is a bigger risk for India - the surge in US bond yields or the rising COVID-19 cases? What are other risk factors one should keep monitoring in coming financial year 2021-22?
The sudden rise in the US bond yields could impact the FPI flows into India. However, the positive announcement by the Fed to continue to provide liquidity for a reasonable period is positive for equities. The rising US treasuries could have an impact on the Indian G-sec yields, which may mirror the same. Rising COVID cases and partial lockdowns in some states could impact the domestic recovery process. Apart from this, crude oil prices and monsoon will also be keenly watched along with execution of the asset monetisation plan by the government while globally any significant policy changes in the US would be a key monitorable.
Q: What are your broad expectations from March quarter earnings that will kick off next month? Will it set the strong tone for FY22 earnings? Can you name the sectors which are expected to report strong and weak earnings in March quarter?
While the low base would aid the earnings performance in the March quarter, we believe companies sensitive to cost inflation are likely to see a risk to their earnings growth momentum. We believe management commentary will be important as it would help in understanding how FY22 will play going ahead.
Q: If the correction extends in coming weeks, what should investors look for buying in terms of sectors and stocks? What should be pecking order in terms of percentage in the portfolio?
The government is committed to revive economic growth even at the cost of higher fiscal deficit. Government's investment push and the reduction in corporate taxes effected earlier could help revive the corporate capex cycle. Our positive bias is tilted in favour of sectors such as Infrastructure, Cement, Capital Goods, Utilities, Auto & Auto Ancillary while sectors such as BFSI, Consumer Durables etc. could consolidate for time being.
Q: After 30 IPOs in the financial year 2020-2021, do you expect more number of IPOs in the coming financial year too? Also, will the government be able to divest 2 private banks and bring LIC IPO in FY22?
As seen in the past, liquidity tailwind had led to a mad rush of IPOs and other capital raising initiatives by companies. Given the availability of ample money at lower cost, we will continue to see higher public issuance in the coming financial year. On the divestment front, government has been actively looking at it for almost two years now while the process got further delayed due to the pandemic. We feel if Air India and BPCL divestment sail through in the first half of the next fiscal, it will set the right momentum, which will make the process for further divestments much easier.
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