Realty is on a swing with a robust outlook especially for the residential segment ever since a structural reset took place with the introduction of the Real Estate Regulatory Authority (RERA). As a major contributor to the economy's growth and employment, the real estate sector will perform better in the years ahead, believes Gaurav Misra, Co- Head of Equity at Mirae Asset Investment Managers (India).
In the power sector, he feels valuations are not appropriate except in some select cases. Returns are typically driven down by competitive bidding and other forces, he shares at an interview with Moneycontrol. Excerpts from the interview:
Do you think earnings due to higher commodity prices is a bigger risk than the Fed move for the market now?
I think neither is a risk to the market over the medium term. There is a part of corporate earnings which benefits from higher commodity prices, while there is another part where margins are impacted. Moreover, the Ukraine issue has added another supply shock to the commodity dynamics. As and when the geo-political crisis settles, some of the pressures will unwind.
Similarly, many of the Fed moves have been incorporated by the market in the past few months. There is of course the risk of bad Fed policy impacting the outlook for the market. Ultimately it will be the stability of the domestic macros along with the growth outlook for the Indian economy and corporates which will be the driver of the domestic market.
Do you think the RBI is worried about inflation after a spike in commodity prices?
I think the monetary policy in India has been very relevant for the underlying circumstances and challenges faced by the economy. Clearly there is an element of inflation which has been exacerbated by the Ukraine developments. The RBI has incorporated that into its projections even as it has kept a stable monetary environment and wants growth to play out as the economy is now unlocked.
The RBI will of course keep a hawk eye on inflation and its causes. Given that the genesis of the inflation problem is external and not a problem of a ultra-loose domestic monetary policy or over-heating of the economy, I think a calibrated approach by the RBI is appropriate.
Do you see any possibility of a retail inflow and a simultaneous FII inflow in the coming quarters?
I would say any four of the combinations - plus/minus retail flow with plus/minus FII flow - are possible. It will be appropriate at all times to be clear of investment objectives, have an appropriate investment horizon, adhere to asset allocation and stay the course.
How do you see opportunities in real estate for the coming quarters?
The outlook for the sector, especially in the residential segment, has been improving after a structural reset post RERA (Real Estate Regulatory Authority). The demand outlook has been robust, given the pricing trends, interest rates, increase in affordability, etc. The sector, as a contributor to the economy's growth and employment, could do well in the years ahead.
What is your take on the power sector and should one have these stocks in a portfolio in view of the increasing focus on electric vehicles, renewable energy, and so on?
The power sector growth is linked to the overall economic growth with an additional overlay of renewable energy substituting the non-renewable part of the portfolio. Project returns are typically driven down by competitive bidding and other forces. Sector valuations are not appropriate except in some select cases.
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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