Bank stocks have been a battered lot, for reasons ranging from shrinking margins to inflation to rate hike by the US Federal Reserve. Yet, some experts continue to remain bullish on banking stocks. Amit Jain, who co-founded Ashika Global Family Office Services, is one such optimist.
Jain is more upbeat on state-run lenders. He believes that the trend of outperformance in the PSU space will continue in the medium to long term as they have to catch up on the valuation front with their private peers.
He believes that the Nifty will hold above 19,000 as on the general election date in June 2024. "By next year, at the same time post-elections, we will be close to the 21,000 mark on Nifty," says the expert with 18 years spent in the Indian banking and financial services industry.
Jain doesn't fit into the camp which predicts the US slipping into a recession next year. "Even if we take the worst scenario, the pace of growth in the US may slow down in the next six months, but it will certainly not be a recession for the US economy." Jain sounds upbeat on the resilience of the economy and revival in markets as he shares his views in an interview with Moneycontrol. Excerpts from the interaction:
September quarter earnings are on. What's your take on the trend so far?
Most of the earnings in the banking sector and IT sector are in line with our expectations. As I had said earlier, we expected robust earnings in the banking sector and mediocre earnings in IT. Most of the earnings by now have reflected the same pattern.
We thought PSU banks put up excellent earnings and that's evident in the results of Bank of Maharashtra, where the year-on-year profit has surged almost 70 percent which, by any standard, is an excellent performance. We continue to hold a bullish stance on the entire banking sector, especially on-quality PSU banks.
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Bonds have turned a bother. Do you expect the US bond yields to remain elevated for the rest of the calendar year?
It is a difficult question to answer as it involves so many factors, from crude oil prices to metal prices to supply-side shocks because of geopolitical unrests. If you go back to three months, every analyst on the Street was bearish on crude oil when it was trading around $65 a barrel, and then everybody thought that global inflation would ease out soon, but today, we are again seeing the oil above $90, which may create another inflationary bubble in global economies going forward.
Unless we see a sustainable downward trend in crude oil and metals, it is difficult to predict when bond yields will peak out. However, I believe, we are in the last leg of the bull run in global bond markets. As of today, the 30-year G-sec yield is close to 5 percent, which is a multi-decade high. It is an excellent opportunity for conservative investors to invest their money in US government securities (G-sec) and even Indian government securities for their long-term, stable portfolios.
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Do you see the US in the fold of recession?
No. I don't believe that the US will get into recession, thanks to its ongoing robust economic numbers. If you observe the US GDP numbers closely, you will find there is a very strong underlying tone along with rock-solid growth in employment numbers. The US Fed started raising the rate of interest in April 2022, and since then it has increased the rate of interest from 0.5 percent to 5 percent, which is a 900 percent increase in the US Fed rate of interest in the last 18 months.
Even after such a steep rise in the rate of interest, the US economy has refused to slow down. It shows the inherent robustness of the US economy. Hence, I don't believe the US will fall into a recession; even if we take the worst scenario, the pace of growth in the US may slow down in the next six months, but it will certainly not be a recession for the US economy.
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Coming to the Indian equity markets, what do you think will be the next trigger for the market that can push the frontline indices to new highs?
From an Indian stock market perspective, most of the earnings look good, except for the IT sector. However, even after such robust earnings, the frontline indices are not moving forward due to a lack of liquidity inflow by global investors. Global investors will start investing in the Indian stock market once the US G-Sec yield starts falling off, which is almost 6 to 9 months away in my personal view.
In the last six months, the Indian stock market has outperformed almost all other stock markets in the world. Dow Jones, from the past six months, has been almost flat to negative; however, Nifty50 has given a 12 percent return, which has outperformed by miles by any standards.
Hence, ongoing current time correction in Indian stock markets seems an excellent opportunity for domestic investors to invest in the right sectors and stocks.
Also read: India's economy will reach $7 trillion by 2030, forecasts JPMorgan’s James Sullivan
Do you believe that the Nifty can hold the 19,000 mark till the general elections?
Certainly. I do believe that the Nifty will hold above 19,000 as on the general election date in June 2024. In the short term, we may have some volatility, given the global geopolitical risks, but in the end, we believe that the Indian stock market will continue to outperform the global stock market by miles.
In my personal view, by next year, at the same time post-general elections, we will be close to the 21,000 mark on Nifty.
Do you expect more runs in the PSU space?
Yes, I do believe that there is more steam left for quality PSU stocks even from here on. In the last one year, PSU bank stocks have given a return of 60 percent which has outperformed any of the sectors of Indian stock market by miles.
In my view, this trend of outperformance in the PSU space will continue in the medium to long term as they have to catch up on the valuation front with their private peers. Even in this PSU space, I'm extremely bullish on banks and energy 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.
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