The fall in GST tax rate has come at the right time and a shot in the arm for FMCG companies. We should see a pickup in volume growth at the end of FY18-19. But, profitability could take a knock or remain at current levels, Pramod Gubbi, Head of Equity at Ambit Capital said.
Macros which were sometime back offered tailwind to India market has now become a headwind and might no longer offer support to equities, suggest Pramod Gubbi, Head of Equity at Ambit Capital on the sidelines of Ambit India Access Conference in Singapore.
India had a great time over the last three years in terms of macro indicators and now all of these elements (low inflation, current account deficit, fiscal deficit) are now showing signs of pickup partly due to locally and geopolitical concerns emanating from Middle-East, he said.
“We expect a pickup in inflation in the next 12-18 months. Leaving aside global risk and geopolitical risk there is some balance between a pickup in inflation and growth which the government should be able to manage going forward.
If stimulus measure continues we may not see easing on the monetary policy front by the RBI, said Gubbi.
Commenting on the crude oil, Gubbi said oil is a difficult call right now. If the geopolitical risks escalate, oil could head northwards but that of course beyond our purview.
Crude Oil has rallied by about 20 percent since the start of September as global supplies tightened and speculation mounted that the Organization of Petroleum Exporting Countries (OPEC) and allies producers will extend output curbs beyond the end of March, said a report.
On FMCG companies, Gubbi is of the view that consumer companies welcome the move of GST rate cut. It was important primarily because the demand has been fairly muted. Most of the larger FMCG companies saw middle or even lower single-digit volume growth for companies for an extended period of time."The fall in GST tax rate has come at the right time and a shot in the arm for FMCG companies. We should see a pickup in volume growth at the end of FY18-19. But, profitability could take a knock or remain at current levels,” he said.