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Daily Voice | India's domestic savings to reach $3 trillion next decade, says Manisha Girotra of Moelis

Domestic large-cap companies will continue to accelerate their footprint with inorganic acquisitions going ahead.

November 05, 2021 / 07:48 AM IST

An improved purchasing power, strong capital inflows, and the emergence of a dynamic entrepreneurial class will make sure that India’s growth momentum sustains itself for the next decade, believes Manisha Girotra, India Chief Executive Officer at Moelis & Company, a US-based global Investment Bank.

“India is really into a strong bull run,” she says. A deeper and wider pool of capital is entering the country and domestic savings are being channelled into the stock market, instead of going into gold, real estate and physical assets. Today, domestic savings stand at $1 trillion and are expected to reach $3 trillion in the next decade, the veteran investment banking professional, with extensive cross-border M&A expertise across a broad range of industries, shares with Moneycontrol during an interview. Excerpts from the interview:

Do you expect India’s economic growth to be higher than its global peers in the coming years?

Yes, I expect India to grow very robustly in the next decade. The difficult structural reforms implemented in the last five-seven years, including demonetisation, implementation of the Real Estate Regulatory Authority (RERA) and the Insolvency and Bankruptcy Code (IBC) rules, deleveraging of balance sheets, the Goods and Services Tax (GST), JAM implementation and digitisation of the economy have all laid the basis for a wider, more inclusive growth, which includes both Bharat and India.

The improved purchasing power, strong capital inflows and the dynamic new entrepreneurial class will make sure India’s growth momentum sustains itself for the next decade. Reforms to agriculture, power, mining and labour will further unshackle the economy.

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Why do you think that the Indian equity market is in a strong bull phase?

Yes, I believe that the market is in a strong run. I think there are two reasons for this.

First, deeper and wider pools of capital are entering India. Not just classical financial investors, but sovereign wealth funds, pension funds, endowment funds and sector specialist funds are all investing in the country in size and scale.

Second, domestic savings are being channelled into the stock market as opposed to going into gold, real estate and physical assets. Today, domestic savings stand at $1 trillion and are expected to increase to $3 trillion in the next decade.

Do you foresee a slowdown in primary market after the LIC public issue expected around last quarter of FY22?

No, I don’t think so, although I expect investors to become more discerning about the quality of companies that are going to IPOs, the quality of their existing investors and founders, corporate governance standards, quality of growth and earnings.

What are the sectors that can boost your portfolio returns in coming years?

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Pharma, software services, consumer and technology are the key sectors for growth. Pharma and software services will stand out, driven by strong exports. Indian IT companies are crucial partners for global companies in their digital transformation journey while Indian pharma becoming the supplier of pharmaceuticals to the world.

Indian tech companies and consumer companies, which are playing on the strong and rapidly growing incomes and spending power of the Indian consumer, will also come out winners. Agri tech, education tech and health tech will gain critical mass and emerge winners.

Do you think the expected inflationary pressure, Fed tapering, increase in interest rates globally, and slow job creation could dampen the market sentiment?

Yes, global risks remain a concern. Supply-side constraints are getting worse which will lead to inevitable inflationary pressures. However, I believe the Fed tapering will be systematically implemented and markets globally should be able to absorb the changes. Also, if the pandemic can be suppressed going forward, global economies should recover and compensate for the tightening monetary situation.

Do you expect M&A activities to increase significantly in the coming years as India is expected to show strong growth going ahead?

Yes, M&A activity is and will continue to be robust. Domestic large-cap companies are very well capitalised and will continue to accelerate their footprint with inorganic acquisitions which will help them gain market share, acquire customers and expand geographies.

Global financial investors will continue to acquire businesses which play on the strong domestic consumer market. Pharma and IT companies will look globally for assets that give them access to markets, skills and technology. The IBC process will continue to generate opportunities for special situation funds, distressed funds and corporates, which will fuel deal making.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Nov 5, 2021 07:48 am
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