Poonam Tandon, CIO at IndiaFirst Life expects the RBI to continue to provide liquidity enhancement measures till growth is sustained on a durable basis in addition to the continuance of accommodative stance and active yield curve management.
"Once the people are vaccinated and we move towards normalization, growth will pick and may even do better than the 9.5 percent forecast. Moreover, the base (FY21 GDP saw a decline of 7.3 percent), domestic capex cycle picking up, expectation of normal monsoon, are all supportive," she said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q: What is your reading of the RBI monetary policy and will RBI continue with accommodative stance, at least, till the end of March 2022?
The RBI policy was largely on the expected lines from macro-economic perspective – maintained the status quo on policy rates and accommodative stance. We believe the central bank will continue with its proactive and pre-emptive approach to ensure economy returns to growth and keeping ample liquidity to support growth even with elevated inflation risk – the policy stated that the focus is now shifting to equitable distribution of liquidity in real economy along with other financial stability measures.
Having said that, if the economy picks up well by second half of FY22, we could see the withdrawal of accommodative stance in FY23. Till then they will continue unconventional and regulatory measures to improve policy transmission and support government borrowings.
Q: What further measures are you expecting from RBI in the coming monetary policies to revive growth?
We expect the RBI will continue to provide liquidity enhancement measures till growth is sustained on a durable basis in addition to the continuance of accommodative stance and active yield curve management. We also expect RBI to take further measures so as to improve the credit offtake as it remains low by giving incentives to banks and give more aid to specific sectors by designing restructured packages to sectors that have been hit hard due to the pandemic.
Q: Do you think with current measures and falling COVID cases & vaccination drive, India can achieve the RBI's growth forecast of 9.5 percent in FY22, which lowered from 10.5 percent?
During the second wave, the lockdown was not uniform across the country and the degree of lockdown varied from place to place. Therefore, economic activity continued albeit at a slower pace. Once the people are vaccinated and we move towards normalization, growth will pick and may even do better than the 9.5 percent forecast. Moreover, the base (FY21 GDP saw a decline of 7.3 percent), domestic capex cycle picking up, expectation of normal monsoon, are all supportive.
Q: Given the improving market sentiment amid falling COVID cases, can you name the pockets which are available at attractive valuations to buy now, and why?
As the economy reopens, we believe the government focus will move back on infrastructure investments. Moreover, we are seeing corporates starting to show willingness to spend after many years of deleveraging which augments well for the credit offtake. We expect sectors such as Capital Goods, Cement, Utilities, Metals, Banks to do well. Pharma and IT are expected to do well from mid-term perspective.
Q: Do you think it is the time to do more on health policy and vaccination than fiscal and monetary policy?
Health policy has been brought to the forefront due to the pandemic and was long ignored. The vaccination and healthcare will help support the people recover and also prevent further 'waves'. However, to spur economic recovery fiscal and monetary policy is necessary and all the three are needed in tandem to grow in well-being in all aspects.
Q: With the subsiding COVID infections and government support, will the market momentum continue in the rest of 2021? Will the broader markets outpace benchmarks in coming years?
Market momentum will continue as we are on a new growth trajectory although we could see some consolidation or corrections on the way. We would approach market by being stock selective and focus on companies with strong fundamentals and having significant operating and financial leverage and also attractive valuations.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.