"We believe that Indian equities will outperform the other markets in the near-term future. We had a reasonably good budget, in fact, there was nothing adverse in the budget," Santosh Joseph, Founder of Refolio Investments said in an interview with Moneycontrol.
The key take-away from the RBI monetary policy is that, though the inflation issue is still not fully settled, we are in a more manageable situation right now than before, he observed.
The financial services professional with over 20 years of experience in asset management, banking and insurance thinks the big sector or trend that could outperform is going to be consumption.
Joseph believes that the trend is only going to get better and as more people come into the ambit of being consumers and the purchasing power of the average Indian citizen increases. This will mean more money in the hand of investors, and hence, more consumption power.
Have you spotted any major cues in the Monetary Policy Committee decision and the RBI governor commentary?
With the recently concluded Monetary Policy Committee by the RBI and the commentary, I think the key cue that you can take away is that the situation today is not as bad as we all thought it would be. Globally, the fears of raging inflation have now been reserved to inflation being slightly manageable or in a sticky outlook.
While even the economic situation across the world looks a lot better than what it was a few quarters back. So the key take-away is that, though the inflation issue is still not fully settled, we are in a more manageable situation right now than before.
The previous efforts have helped the cause while remaining cautious about being very vigilant in keeping an eye on how inflation moves from here on, basically strict control.
What is your reading on the Adani issue and is it fully discounted in all stocks now?
On the Adani issue there is so much news floating around beginning from the Hindenburg report to an FPO which got subscribed then later got withdrawn and money was repaid back. The massive amount of news flow that keeps coming in every hour on the Adani issue.
We do not yet know whether it is fully discounted and we have already made a bottom, but I think across the board people are watching these developments closely. This is an issue which definitely has had an impact on both the market and the banking system and will be closely watched.
Do you really believe the Indian equity markets will outperform others in coming years?
We believe that Indian equities will outperform the other markets in the near-term future. We had a reasonably good budget, in fact, there was nothing adverse in the budget.
1> Globally, both the developed markets across the world are looking much better than they were last year.
2> There is also a nice rebound happening in some of the famed ultra large-cap stocks in the US which are turning around and have made some good recovery from the recent lows.
In India, we have had a severe overhang with the anticipation of the budget and some FII outflows and even the Adani issue. But I think when this issue settles down we will find our natural course and trend upward.
Which is the one sector/theme that can outperform every other sector in the coming years?
I think the big sector or trend that is going to outperform is going to be consumption. Whether you play consumption through FMCG or client-facing businesses or at some level even those consumption based banks and financial stocks. The bigger theme that we are going to be rooting for India is the consumption play at hand.
I think over the years it is only going to get better and as more people come into the ambit of being consumers, when the purchasing power of the average Indian citizen increases that will mean more money in the hand of investors which means more consumption power.
Therefore the consumption story remains very strong. So I think that is not only going to be a sector for the near to medium term but it's also going to be a long-term story.
Do you expect a big rally in the FMCG sector in the coming quarters given the recovery in rural consumption?
Just like consumption, FMCG as a sector is very vital and one way of playing consumption is FMCG. Given the backdrop of the rural economy also showing signs of recovery and the big city demand being more or less consistent, there is a reason to believe that FMCG should have a better story going ahead in the next two to three years.
Do you see any possibility of tariff hikes in telecom space for rest of the calendar year?
We have already seen as far as tariff hikes in telecom are concerned, it happens regularly. There is no reason to believe that tariff hikes won't happen. It may happen with the way the telecom industry is consolidating in such a strong manner.
When we have strong consolidation there will be a reason to believe that there will be tariff hikes. While we cannot predict the intensity and frequency of it but it is not out of bounds to think that we will not have tariff hikes, we may see it happen.
Do you expect any big challenge for the equity markets in coming financial year?
The big challenge for equities this financial year is what we have already seen in the calendar year 2022, in 2023 similarly we have already begun the year with a lot of FII outflows, and dollar index also moving up, which are all critical for an emerging market like India where flows are a very important aspect of the way markets perform.
And also the earnings that keep coming quarter after quarter. These are a few things that could make the medium to short term a little volatile. Thus, minus these aspects, any other big challenge could be something that we have not planned for.
Coming to the last question, which is the most surprising announcement in the Union Budget?
The most surprising announcement in the Union Budget which people took very differently are
a) Insurance maturities in excess of 5 lahks that you get from insurance get taxed
b) The change in insurance proceeds taxations puts many of the other financial services products at parity. Insurance enjoyed that benefit for quite a long time.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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