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Daily Voice | This finance professional bullish on Indian markets, rules out major threat from US crisis

Year-to-date the market run-up is led by Power and Auto stocks and then FMCG stocks. FMCG stocks performed after a poor performance in the calendar year 2021. Given the long-term opportunities for the business in this sector, there is still plenty of reasons to invest in FMCG space.

July 28, 2022 / 08:09 AM IST

IV Subramaniam of Quantum Advisors believes India looks good on multiple parameters and the potential to earn long-term returns from the equity market remains high despite the volatility and corrections.

While talking to Moneycontrol, he, however, reserves his comments on the bottom or top of the market. "The potential for India is so high that all investors should be overweight on Indian equities, says the financial services professional, seasoned for over 25 years in the Quantum family.

The probability of the US slipping into a recession appears to be high based on the survey done by Bloomberg. "But, recession in the US will not have a major impact on India, our rate of growth may marginally slow down and then bounce back. This was also seen after the global financial crisis in 2008," says the Managing Director of Quantum Advisors.

Excerpts from Subramaniam's interaction with Moneycontrol:

We saw FMCG taking major part in the recent market run. Do we still have enough opportunity in the space to grab?

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Year-to-date the market run-up is led by power and auto stocks and then FMCG. The sector revived after a poor performance in 2021. Given the long-term opportunities for the business in this sector, there is still plenty of reasons to invest.

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However whether to invest or not will also be a function of what type of investor you are. A value investor will probably shy away from investing in the FMGC sector as they appear expensive while a growth investor may go ahead and invest.

How do you see the Indian economy hedged against a recession in the US or a slowdown in Europe, in case there's one in the offing? 

The probability of the US getting into a recession appears to be high based on the survey done by Bloomberg. However, recently after this survey was done, some macroeconomists have pointed out that a recession may not happen.

A recession in the US will not have a major impact on India, though, I think. Our rate of growth may marginally slow down and then bounce back. This was also seen after the global financial crisis in 2008. The main reason for this is that India is not a big manufacturing hub and our manufactured exports are probably around 10 percent of the GDP, hence a recession in the developed world does not have a major impact on India.

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With the significant equity market recovery from June lows, are we bottomed out for the time being?

Timing the market or calling the peak or bottom of the market is something I am not equipped to comment on. All I can say is that India looks good on multiple parameters and the potential to earn long-term returns from the equity market still remains high.

FIIs are back in the buying mode. Do you think this is going to last? 

The potential for India is so high that all investors should be overweight on Indian equities. However near-term flows could be impacted by rising interest rates and we cannot say for sure that the tide has turned in India's favour based on a weeks' flows.

When the risk is high, investors may prefer to be biased towards their home country, hence probably the outflows in the past few months. Now after the year-to-date decline, the valuations look more attractive and the growth outlook is strong on a relative basis. Hence some foreign investors who sold earlier in the year or a new set of investors may start to look at India for investing.

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How do you see the June quarter earnings announced by Indian corporates?

The trend in earnings in June 2022 quarter was not very worrying. Near-term earnings may be impacted by high existing inventory costs; however, with metal and key raw material prices declining in recent weeks, the pressure on margins may be reduced. Bear in mind some of the cost increase has also been passed on to consumers.

On IT space, do you think this is the right to take a position there or it's better to wait for some more time in view of the uncertainty in the US?

After the decline in IT stock prices from their recent peak, they do look attractive for an investor having a longer-term outlook. The US recession may or may not happen, hence there is no point in waiting. The other way to look is that a recession in the western world may result in the loss of some business but the desire to keep costs under control may result in higher outsourcing of software needs and this augurs well for Indian software companies as it is still cheaper to deliver software from India than it is to get it done in the US.

The recent currency depreciation may also make outsourcing from India more attractive, which is a positive for IT companies.

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.
Sunil Shankar Matkar
first published: Jul 28, 2022 08:09 am
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