"We believe that the fundamentals of the Indian economy remain strong from a near to medium-term perspective," Sushant Bhansali, CEO of Ambit Asset Management told Moneycontrol in an interview.
The Indian government, in the last couple of years, has taken several measures to ensure the same, and at the same time, the RBI has done a commendable job of managing inflation, interest rates and currency.
"We do not foresee any major growth challenges in the coming quarters and believe that Nifty should easily be able to do 15 percent EPS growth in FY24," he says.
With over 19 years of experience in the asset management, capital markets, and advisory for M&A deals, Bhansali is fairly bullish on IT services, autos, pharma, banks and discretionary consumption sectors and believes it's a good time to build a position in these sectors. Edited excerpts:
Do you think the current banking crisis in the US and Europe increases the possibility of global recession this year?
The current banking crisis is a result of inadequate risk management practices rather than a fallout of the Fed tightening. Having said that, despite the brewing turmoil, the Fed in its last meeting said that they remain confident of a soft landing for the US economy.
The general sense in the market is that while there does seem to be a crisis there are three effective ways to handle the same - a) Backstopping from Fed, b) heightened M&A activity, and c) a more balanced and judicious approach towards handling the monetary policy. While there remains a possibility of a US recession, we do not believe that the recent events heighten the chances.
Also, do you expect the US Federal Reserve to begin the interest rate cut cycle towards the end of this calendar year, especially after banking crisis?
Again, monetary policy is always dictated by the target inflation rate in the economy rather than a comprehensive review of the state of the economy. This is also the reason why the Fed has been so focused on bringing down inflation, even if it comes at the cost of the economy slowing down.
Hence, given that inflation continues to persist above the target rate and is unlikely to come down below the 2 percent levels anytime soon, we believe that the probability of a rate cut in this calendar year remains fairly low.
Do you see some earnings growth challenges in coming quarters?
Looking at the current state of the Indian economy - rural demand continues to stabilize, commodity prices are benign (despite China reopening), private sector capex is showing signs of revival, government actions & policies are supportive.
Given these factors we do not foresee any major growth challenges in the coming quarters and believe that Nifty should easily be able to do 15 percent EPS growth in FY24.
Do you think NBFCs will get impacted from debt fund tax tweaks?
The latest amendment in the Union Budget does increase the incidence of taxation on debt MFs thus reducing their attractiveness. The latest rule change could potentially slow down the investment by MFs in NBFC issued debt instruments. However, this should not be a major cause of concern; it would just mean that NBFCs would need to change the funding pattern relying more on bank loans.
Do you see the Indian Economy slowing down?
We believe that the fundamentals of the Indian economy remain strong from a near to medium-term perspective. The Indian government, in the last couple of years, has taken several measures to ensure the same.
At the same time, the RBI has done a commendable job of managing inflation, interest rates and currency. We believe that given the current strength of the economy, a sustainable 10-12 percent nominal GDP growth rate can be easily achieved.
India will not just be a $5 trillion economy in the coming days but will remain a foremost contributor to global GDP growth.
Do you expect another 10 percent cut in equity markets in coming months?
Equity markets have been stagnant for the last 16-18 months now, leading to a significant correction in broader market valuations. Nifty valuations at ~17x are now below the long-term average levels.
Given the 15 percent earnings growth likely in FY24, the markets are trading at less than 1.5x PEG. Hence, we do not believe that any material correction is likely in the near term and this does seem to be the correct time to invest.
Which sectors/themes can generate alpha in next financial year?
We are fairly bullish on IT services, autos, pharma, banks and discretionary consumption sectors and believe it's a good time to build a position in these sectors.
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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