The steep depreciation in the rupee is cause for concern but there's no reason to fret too much over it as it would should not go down further as the global narrative shifts towards recession, shares Naveen Kulkarni of Axis Securities.
India may not see recession in the next two to three years, which means that currency is very likely to stabilise, says the chief investment officer.
The seasoned finance professional believes that the RBI will raise the key policy rates by 50bps at the next Monetary Policy Committee meeting, but hikes beyond that would depend on various global factors as India cannot be disconnected from world events.
The views came up during an interaction with Moneycontrol. Excerpts from the discussion with Kulkarni:
Rupee is hovering on its historic lows. How do you see the scenario as a professional?
Rupee depreciation is worrisome, but in our opinion, it should not depreciate further as the global narrative is shifting towards recession, and India may not see recession in the next two to three years. Thus, the rupee is very likely to stabilise.
The next RBI Monetary Policy Committee meeting is round the corner. What is your estimate on the key rates?
It is very likely that the RBI will raise the key policy rates by 50bps, but hikes beyond that will depend on global factors as India cannot be disconnected from world events.
What's your take on the corporate earnings?
Corporate earnings are on expected lines and the consumer sector has demonstrated healthy trends, which is an indicator of a strong economy.
Some 70 listings are awaiting the Sebi nod. How do you see the primary market in the backdrop of an upbeat secondary market?
The primary market will take some time to revive as the previous year's benchmark was quite high, and expectations take time to tone down. This year will be much slower than last year, but there will be activities, and good business models will be able to raise capital in the forthcoming months.
Two sectors that were ahead of others in the recent market recovery were consumption and FMCG. Do you think that investors should be cautious after more than a 17 percent rally in the last one-and-a-half months?
The consumer sector has not participated in the post-pandemic rally. FMCG was a major underperformer during the entire period of the pandemic rally. Some of the consumer discretionary stocks were below pre-Covid levels three months back. Thus, the consumption sector doing well as the economic activity has come to full steam is no surprise.
The only challenge for the sector will be valuations, but areas where valuations are comfortable, say ITC, will continue to perform well.
With the sharp revival in the market sentiment, do you expect the benchmark indices to hit record highs well before Diwali?
It is possible, but I will not bet on a time frame. However, India is still one of the most attractive markets in the world, and it can perform quite well over the medium term.
So, it is only a matter of time before the Index will hit new highs. Whether it is Diwali or New year, or before the next fiscal, the timing is uncertain as macroeconomic events will continue impacting the markets.
After a significant run-up in large-caps, do you think the focus will shift to mid-caps and small-caps?
It is very likely that midcaps and smallcaps could start performing. However, the focus will still be on quality and earnings growth in small caps and midcaps.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.